Q1 2024 Walker & Dunlop Inc Earnings Call
Please standby.
Operator: Good day, and welcome to the Q1 2024 Walker & Dunlop earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jenna Sims. Please go ahead.
Good day and welcome to the Q1, 'twenty 'twenty four Walker and Dunlop earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Jonathan. Please go ahead.
Jenna Sims: Thank you, Ruth. Good morning, everyone.
Jonathan: Thank you Ruth.
Jonathan: Everyone. Thank you for joining Walker and Dunlop first quarter 2024 earnings call.
Jenna Sims: Thank you for joining Walker & Dunlop's first quarter 2024 earnings call. I have with me this morning our Chairman and CEO, Willie Walker, and our CFO, Greg Florkowski. This call is being webcast live on our website, and a recording will be available later today. Both our earnings press release and our website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation in the Investor Relations section of our website, www.walkerdunlop.com.
Jonathan: 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.
Jonathan: 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 W. W. W. W. Dot Walker Dunlop dotcom.
Jenna Sims: 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 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.
Jonathan: These slides serve as a reference point for some of what Willy and Greg will touch on during the call.
Jonathan: Please also note that we will reference the non-GAAP financial metrics adjusted EBITDA and adjusted core EPS.
Jonathan: In the course of this call.
Jonathan: Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics.
Jenna Sims: 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 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. 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 will now turn the call over to Willie.
Jonathan: Investors are urged to carefully read the forward looking statements language in our earnings release.
Jonathan: 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.
Jonathan: Forward looking statements describe our current expectations and actual results may differ material materially.
Jonathan: 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, we expressly disclaim any obligation to do so.
Jonathan: More detailed information about risk factors can be found in our annual inquiries. He reports filed with the S. E C I will.
Jonathan: Now I'll turn the call over to Willie.
William Mallory Walker: Thank you, Jenna, and good morning, everyone. As we outlined in our February earnings call, the strong January jobs report pushed back expectations for a March rate cut. And the 10-year Treasury rose from 3.88% at year-end to a high of 4.34% during the first quarter. Market uncertainty and rising rates disrupted the transaction market. And according to RCA, in first quarter 2024, multifamily property sales volume was the lowest level since Q2 2020, when the pandemic shut down the market.
Willie: Thank you Gina and good morning, everyone.
Willie: As we outlined in our February earnings call.
Willie: January jobs report pushback expectations for March rate cuts and the.
Willie: 10 year Treasury rose from 3.88% at year end to a high of 4.34% during the first quarter.
Willie: Market uncertainty and rising rates disrupted the transaction market.
Willie: And according to RCA first quarter 2024 multifamily property sales volume was the lowest level since Q2 2020, when the pandemic shook out in the market.
William Mallory Walker: Yet within this context, the W&B team closed $6.4 billion in total transaction volume, down only 5% from Q1 of last year, given slightly lower volumes and no one-time benefits that we earned in Q1 last year, which we pointed out on our last earnings call. Q1 diluted earnings per share were $0.35, down 56% year over year.
Willie: Yeah within this context the W. N V to close to $6 $4 billion of total transaction volume down only 5% from Q1 of last year.
Willie: Given slightly lower volumes and no onetime benefits that we earned in Q1 last year.
Willie: Which we pointed out on our last earnings call.
Willie: Q1 diluted earnings per share were <unk> 35 cents down 56% year over year.
William Mallory Walker: Adjusted core EPS, which strips out non-cash mortgage servicing right revenues and expenses, was $1.19, up 2% from last year. And adjusted EVA-DA, which has been an important indicator of W&E's growth and financial stability, was $74 million, up 9% from Q1 of last year. Dramatic Earnings Growth & Expansion Cycles, Steady Earnings & Cash Flow, and Down Cycles are what allows W&B to maintain our market presence and invest for the future in challenging markets.
Willie: Adjusted core EPS, which strips out non cash mortgage servicing right revenues and expenses was $1.19 up 2% from last year.
Willie: Adjusted EBITDA, which has been an important indicator of doesn't reduce growth and financial stability with $74 million up 9% from Q1 of last year.
Willie: The origination and servicing businesses, we have built.
Willie: Dramatic earnings growth and expansion cycles.
Willie: Steady earnings and cash flow in down cycles.
Willie: [noise] allows W. Indeed to maintain our market presence and invest for the future and challenging markets.
William Mallory Walker: $6.4 billion of transaction volume is driven by strong debt brokerage volume of $3.3 billion, up 40% year over year. Our clients need capital, and our debt brokerage team did a fantastic job finding the appropriate capital for their needs. Importantly, and atypically, over half of our Q1 debt brokerage deal flow was on non-multifamily assets in retail, hospitality, industrial, and office. Additionally, the vast majority of 2024 commercial state loan maturities are on non-multifamily assets. When they start the year by using our debt broker scheme, using non-agency capital is encouraged, but as you can see on slide seven.
Willie: $6 $4 billion of transaction volume was driven by strong debt brokerage volumes of $3 $3 billion.
Willie: Up 40% year over year.
Willie: Our clients need capital and our debt brokerage team did a fantastic job finding the appropriate capital for their needs.
Willie: Accordingly, and a typically over half of our Q1 debt brokerage deal flow was on multifamily assets and retail hospitality industrial and office.
Willie: The vast majority of 2020 core commercial real estate loan maturities.
Willie: On multifamily assets.
Willie: And then start to the year by our debt brokerage today, Mr. Don <unk>.
Speaker Change: It is encouraging.
Speaker Change: But as you can see on slide seven.
William Mallory Walker: The Mortgage Bankers Association estimates that $929 billion of commercial real estate mortgages will churn in 2024. Of that rather large volume, only 28%, or $257 billion, are multifamily loans, and only 3%, or $28 billion, are Fannie, Freddie, and HUD loans. In a normalized market, half the market would be multifamily loans, and half that volume would be with the GSEs and HUD. This lack of multifamily and agency maturities is good from a maturity risk standpoint, but it will require our team to search outside the WND portfolio for financing opportunities, something our team has done consistently as WNB has climbed the league tables and built a $132 billion servicing portfolio. In the first quarter alone, 79% of our refinancings were new loans to Walker & Dunlop. There are two big questions after Q1.
Speaker Change: The mortgage bankers Association estimates that $929 billion of commercial real estate mortgages mature in 2020 four.
Speaker Change: How did that rather large volume only 28% or $257 billion or multifamily loans, and only 3% or 28 billion, our Fannie Freddie and HUD loans.
Speaker Change: In a normalized market aftermarket would be multifamily loans.
Speaker Change: That volume would be with the GSE and HUD.
Speaker Change: This lack of multifamily and agency maturities is good from a maturity risk standpoint.
Speaker Change: But we will acquire our team to search outside the WD portfolio refinancing opportunities something our team has done consistently WMD is quiet in the league tables and built a $132 billion servicing portfolio.
Speaker Change: In the first quarter alone, 79% of our refinancings, where new loans to Walker and Dunlop.
Speaker Change: There are two big questions after Q1.
William Mallory Walker: First, are banks going to require loan payoffs, or are they going to allow borrowers to extend? If banks call loans, there will be over $400 billion of maturities that need to be refinanced off bank balance sheets in 2024. If banks simply extend loans because they are performing and the bank is making SOFR plus 300, for example, there will be no 2024 refinancing of that loan. Second, are Fannie and Freddie going to step into the market and refinance multi-loans that are part of CMBS pools, debt fund CLOs, life insurance company portfolios, or bank balance sheets? They have done this in the past and are doing this today.
Speaker Change: First our banks can require loan pay offs or are they going to allow borrowers to extend.
Speaker Change: Thanks call loans, there will be over $400 billion of maturities that needed to be refinanced all think balance sheets and 2024.
Speaker Change: Thanks simply extend loans because they are performing and the bank is making so plus 300. For example, there will be no 2020 for refinancing of that loan.
Speaker Change: Second our Fannie and Freddie go to step into the market and refinance multi loans that are part of see MBS pools that pardon Clo's life insurance company portfolios or bank balance sheets.
Speaker Change: They have done this in the past and are doing this today.
William Mallory Walker: But, as we stated on our last earnings call, Fannie and Freddie have said that they expect to do the same volume in 2024 as they did in 2023, which given the volume of 2024 maturities surprises us. There are opportunities for the GSEs to exceed their 2023 volumes, but it will require them to be innovative and entrepreneurial, and in partnership with their Duff & Up They Go partners. For example, a multifamily construction loan on a new asset in Austin, Texas, might be priced at SOFR Plus 300 with a 3-1-1 structure, a 3-year loan with two 1-year extension options. However, if the asset is still under lease-up and doesn't have 90% occupancy, it can't qualify for a GRC loan.
Speaker Change: But as we stated on our last earnings call Fannie and Freddie have said that they expect to do the same volume in 2024 as they did in 2023.
Speaker Change: Which given the volume of 'twenty 'twenty four maturities surprises us.
Speaker Change: There are opportunities for the GSE is to exceed their 2023 volumes.
Speaker Change: But it will require them to be innovative and entrepreneurial.
Speaker Change: And in partnership with their desk and I think our partners.
Speaker Change: For example, the multifamily construction loan on a new asset in Austin, Texas might be priced it so plus 300 with a 311 structure three year loans with two one year extension options.
Speaker Change: The asset is still leasing up and doesn't have 90% occupancy it can't qualify for GSE loans.
William Mallory Walker: But if Fannie and Freddie modified their occupancy requirements for assets owned by established developers with impeccable track records... They could put permanent financing on the asset. They would do several things.
Speaker Change: But if fannie and Freddie modified their occupancy requirements for assets owned by established developers with impeccable track Records.
Speaker Change: They can put permanent financing on the asset they would do several things reduce the borrowing costs allow the owner to lock in long term fixed rate financing and also derisked the bank's balance sheet.
William Mallory Walker: Reducing the borrowing cost, allow the owner to lock in long-term fixed-rate financing, and also de-risk the bank's balance sheet. We continue to invest in technology and are seeing promising signs of growth in small balance lending and appraisal. Our Multifamily Appraisal Business Surprise grew Q1 appraisal revenue by 20% while the overall multifamily appraisal market shrunk by 53%. Our investments in technology have generated significant efficiencies in this business. And we achieved our Q1 growth target with 23% fewer people.
Speaker Change: We continue to invest in technology and are seeing promising signs of growth small balance lending and appraisals.
Speaker Change: Our multifamily appraisal business surprise grew Q1 appraisal revenue by 20%, while the overall multifamily appraiser market shrunk by 53%.
Speaker Change: Our investments in technology have generated significant efficiencies in this business and we achieved our Q1 growth with 23% fewer people.
William Mallory Walker: Our small balance lending business has maintained market share with Fannie and Freddie and grew Q1 revenues 17% year over year, with the opportunity to grow dramatically as banks continue to pull back from originating new small balance multifamily. Our servicing and asset management business contributed meaningfully to the strength and adjustability of the TA, thanks to dramatically lower runoff in the portfolio and our conservative credit culture, which has led to strong credit fundamentals within the portfolio.
Speaker Change: Our small balance lending business has maintained market share with Fannie and Freddie grew Q1 revenues, 17% year over year.
Speaker Change: The opportunity to grow dramatically as banks continue to pull back from originating new small balance multifamily loans.
Speaker Change: Our servicing and asset management business contributed meaningfully to the strength in adjusted EBITDA.
Speaker Change: To dramatically lower one off in the portfolio and.
Speaker Change: And our conservative credit culture, which has led to strong credit fundamentals within the portfolio.
William Mallory Walker: We launched a new technology portal for WMD servicing clients at the end of 2023 and already have over 2000 active users. Not only does this bespoke technology save W&D licensing fees, but it puts us closer to our clients with a technology solution we not only own and can upgrade but can add new features to engage more deeply with our significant servicing clients. Walker & Dunlop Affordable Equity, formerly known as Alliant Capital, generated $18 million in revenues in Q1, down 9% from the first quarter of last year.
Speaker Change: We launched a new technology portal for Wmd's servicing clients at the end of 2023.
Speaker Change: And already have over 2000 active users.
Speaker Change: Not only does this bespoke technology say at WMD licensing fees.
Speaker Change: Put us closer to our clients with a technology solution, we not only own and can upgrade.
Speaker Change: But also can add new features to engage more deeply with our significant servicing client base.
Speaker Change: Walker and Dunlop affordable equity, formerly known as alliance capital generated $18 million of revenues in Q1 down 9% from the first quarter of last year.
William Mallory Walker: Although this is a slow start to the year, we closed the Portable Equity Fund 119 with $163 million in funding in early April, which will add to syndication fee revenue in the second quarter. It is our expectation that W&B Affordable Equity increases both fundraising and disposition activity in 2024, with substantial growth over the team's very successful 2023. Finally, credit in our servicing portfolio remains strong. As a result of lower payoffs and continued growth in the portfolio, we grew servicing fees 6% year-over-year in Q1.
Speaker Change: Although this is a slow start to the year, we closed a portable equity fund 119 with $163 million in funding in early April which will add the syndication fee revenue in the second quarter.
Speaker Change: It is our expectation the WNBA affordable equity increases both fundraising and disposition activity in 2024 with substantial growth over the teams very successful 2023.
Speaker Change: Finally credit in our servicing portfolio remains strong.
Speaker Change: And as a result of lower payoffs and continued growth in the portfolio, we grew servicing fees, 6% year over year in Q1.
William Mallory Walker: This is one of the advantages of having both an origination and servicing platform inside of WND. With limited runoff in the loan portfolio, even reduced loan origination volumes add UPV and fee income to our servicing bill. I will now turn the call over to Greg to discuss our Q1 financial performance in more detail, and then I'll come back with some thoughts about what we see coming ahead.
Speaker Change: This is one of the advantages of having both an origination and servicing platform inside of WMD.
Speaker Change: With limited run off in the loan portfolio, even reduced loan origination volumes at <unk>.
Speaker Change: P D and fee income to our servicing business.
Speaker Change: I will now turn the call over to Greg to discuss our Q1 financial performance in more detail and then I'll come back with some thoughts about what we see coming ahead Greg.
Gregory A. Florkowski: Thank you, Willie. And good morning, everyone.
Greg Koski: Thank you Willy and good morning, everyone.
Gregory A. Florkowski: Despite the market challenges Willie just outlined, our team delivered for our clients, and our business delivered growth in adjusted EBITDA and adjusted core EPS for our shareholders. However, the looted EPS was down 56% in Q1. But as a reminder, the first quarter of last year included a few atypical items, including an $11 million benefit for credit losses, a $4.4 million premium write-off from the refinancing of acquired debt, and a $7.5 million investment banking transaction.
Greg Koski: Despite the market challenges Willie just outlined our team delivered for our clients and our business delivered growth in adjusted EBITDA and adjusted core EPS for our shareholders.
Speaker Change: Diluted EPS was down 56% in Q1.
Greg Koski: But as a reminder, the first quarter last year included a few atypical items, including an $11 million benefit for credit losses.
Speaker Change: $4 4 million premium write off from the refinancing of acquired debt.
Speaker Change: And a $7 $5 million investment banking transactions.
Gregory A. Florkowski: These three transactions added about $0.45 of diluted EPS to our financial results last year, and without those items, diluted EPS this quarter would have grown, reflecting lower compensation and G&A expenses from our cost management efforts over the last year. Lower transaction activity in Q1 brought our operating margin and return on equity down to 6% and 3%, respectively.
Speaker Change: These three transactions added about 45 of diluted EPS to our financial results last year and without those items diluted EPS. This quarter would have grown reflecting lower compensation and G&A expenses from our cost management efforts over the last year.
Speaker Change: Lower transaction activity in Q1 brought our operating margin and return on equity down to 6% and 3% respectively.
Gregory A. Florkowski: A core component of our long-term strategy has been sustainable growth in our servicing portfolio to provide the capital to reinvest in the long-term growth of the business and support our quarterly dividends, despite lower transaction activity during the tightening cycle. We continue to invest in our capital markets platform because it fuels the sustainable, long-term growth of our servicing portfolio. At the end of this quarter, our servicing portfolio stood at $132 billion, up 6% from the prior year quarter, and generated $119 million of servicing and related revenue, up 12% compared to the year-ago quarter, when coupled with the largely recurring revenues of our asset management business.
Speaker Change: A core component of our long term strategy has been sustainable growth of our servicing portfolio to provide the capital to reinvest in our long term growth of the business and support our quarterly dividend.
Speaker Change: Despite lower transaction activity during the tightening cycle.
Speaker Change: We continue to invest in our capital markets platform, because it fuels the sustainable long term growth of our servicing portfolio.
Speaker Change: At the end of this quarter, our servicing portfolio stood at 132 billion.
Speaker Change: Up 6% from the prior year quarter, and generated $119 million of servicing and related revenues up 12% compared to the year ago quarter.
Speaker Change: When coupled with a largely recurring revenues of our asset management businesses, we are generating significant cash revenues.
Gregory A. Florkowski: We are generating significant cash revenue. As a result, adjusted EBITDA was $74 million this quarter, up 9% compared to the same quarter last year, illustrating the strength of our business. Turning to segments, and starting with capital markets, Total revenues for this segment declined 21% to $82 million, driven by lower investment banking revenues and a 30% decline in non-cash MSR revenues from GSE lending. Despite the GFC slow start, there are deals in capital available, which drove our broker debt volumes up 40% compared to the same quarter last year. The decrease in non-cash MSR revenues drove a $7.2 million decrease in net income for the segment, while stronger cash revenues on transaction activity delivered in line with adjusted EBITDA at negative $19 million.
Speaker Change: As a result.
Speaker Change: Adjusted EBITDA was $74 million this quarter up 9% compared to the same quarter last year illustrating the strength of our business model.
Speaker Change: Turning to the segments and starting with capital markets.
Speaker Change: Revenues for the segment declined 21% to $82 million driven by lower investment banking revenues and a 30% decline in noncash MSR revenues from GSE lending.
Speaker Change: Despite the GSE slow start there are deals in capital available, which drove our broker debt volumes up 40% compared to the same quarter last year.
Speaker Change: The decrease in noncash MSR.
Speaker Change: MSR revenues drove a $7 $2 million decrease in net income for the segment, while stronger cash revenues on transaction activity delivered in line adjusted EBITDA and negative $19 million.
Gregory A. Florkowski: Our servicing and asset management segment, or SAM, continues to perform well, generating stable cash revenues from our growing servicing portfolio and assets under management. FAM revenues increased 6% year-over-year to $141 million, due primarily to growth in servicing fees and related revenue. With little change now expected in short-term interest rates this year, placement fees should remain elevated in 2024, which will continue to drive our strong cash revenues and adjusted EBITDA for this segment. However, total revenues from Walker & Dunlop Affordable Equity were down slightly from the same period last year.
Speaker Change: Our servicing and asset management segment or Sam continues to perform well generating stable cash revenues from our growing servicing portfolio and assets under management.
Speaker Change: Sam revenues increased 6% year over year to $141 million due primarily to growth in servicing fees and related revenues.
Speaker Change: With little change now expected in short term interest rates. This year placement fees should remain elevated in 2024, which will continue to drive our strong cash revenues and adjusted EBITDA for this segment.
Speaker Change: Total revenues from Walker and Dunlop affordable equity were down slightly from the same period last year.
Gregory A. Florkowski: But, as Willie mentioned, we expect to pick up revenues after closing our latest multi-investor fund in April, a $163 million fund that will add to syndication revenues for the second quarter. Adjusted EBITDA for this segment was $120 million, up 6% year-over-year, and operating margin was 38%, compared to 48% in the first quarter of last year, with the decline in operating margin driven by the previously mentioned $11 million provision benefit that boosted operating income in the first quarter of last year.
Speaker Change: But as Willy mentioned, we expect to pick up in revenues after closing our latest multi investor fund in April.
Speaker Change: $163 million bond that will add to syndication revenues for the second quarter.
Speaker Change: Adjusted EBITDA for the segment was $120 million up 6% year over year and operating margin was 38% compared to 48% in the first quarter of last year with the decline in operating margin driven by the previously mentioned $11 million provision benefit that boosted operating income in the first quarter of last year.
Gregory A. Florkowski: Before I turn to credit, I want to provide an update on the loan repurchases we reported last quarter. We received three loan repurchase requests. One from Fannie and two from Freddie. In March, we completed the repurchase of the FAMI loan for $13 million. We have begun our loss mitigation efforts to resolve the outstanding issues with the asset that led to the repurchase, and we do not anticipate incurring a material loss when the asset is sold following foreclosure.
Speaker Change: Before I turn to credit I want to provide an update on the loan repurchases, we reported last quarter.
Speaker Change: We received three loan repurchase requests.
Speaker Change: One from Fannie and Freddie.
Speaker Change: In March we completed the repurchase of the Fannie loans for $13 million.
Speaker Change: We have begun our loss mitigation efforts to resolve the outstanding issues with the asset that led to the repurchase and we.
Speaker Change: Do not anticipate incurring a material loss when the asset is sold following foreclosure.
Gregory A. Florkowski: The two Freddie loans total $46 million, and in March, we entered into an indemnification agreement that shifts the risk of loss from Freddie to us on those two loans in lieu of repurchasing. One of the loans with Freddie is an $11 million loan that is current, and our customer is working on a plan to sell a portfolio of assets that includes our assets, and we are not expecting to incur a loss on that loan. The second loan is a $35 million loan that shows evidence of fraud by the borrower.
Speaker Change: The two Freddie loans totaled $46 million and in March we entered into an indemnification agreement that shifts the risk of loss from Freddie to us on those two loans in lieu of repurchasing them.
Speaker Change: One of the loans with Freddie is an $11 million loan that is current.
Speaker Change: Our customers working on a plan to sell a portfolio of assets that includes our asset and we are not expecting to incur a loss on that Bob.
Speaker Change: The second loan is a $35 million loan that shows evidence of fraud by the borrower.
Gregory A. Florkowski: We are working on obtaining reliable financial information for this asset, including an understanding of the capital investments required. Based on the preliminary information, we recognized a $2 million loss provision for this loan during the quarter. We will provide updates in the coming quarters but may incur an additional $1 million to $3 million of expenses to fund operating costs and capital improvements for the asset in the coming quarter. The prompt resolution of these loans reflects our strong, longstanding relationship with the GSEs, and we are not aware of any other potential repurchases from either agency.
Speaker Change: We are working on obtaining reliable financial information for this asset <unk>.
Speaker Change: Including an understanding of capital investments required.
Speaker Change: Based on the preliminary information, we recognized the $2 million loss provision for this loan during the quarter.
Speaker Change: We will provide updates in the coming quarters, but may incur an additional 1 million to $3 million of expenses to fund operating costs and capital improvements for the asset in the coming quarters.
Speaker Change: The prompt resolution of these loans reflects our strong long standing relationship with the GSE and we are not aware of any other potential repurchases from either agency.
Gregory A. Florkowski: Turning to our at-risk portfolio, we ended the quarter with six defaulted loans, totaling 11 basis points of the at-risk portfolio, compared to three loans at the end of the fourth quarter. One of the additional defaults is a $12 million loan with the same fraudulent borrower that defaulted on the Freddie loan I just discussed. The other two defaults were loans that were 30-plus days delinquent at year-end that defaulted during the quarter, leaving us with only five loans, 30 plus days to link.
Speaker Change: Turning to our at risk portfolio, we ended the quarter with six defaulted loans totaling 11 basis points of the at risk portfolio compared to three loans at the end of the fourth quarter.
Speaker Change: One of the additional defaults as a $12 million loan with the same fraudulent borrower that defaulted on the Freddie line I just discussed.
Speaker Change: Other key defaults were loans that were 30 plus days delinquent at year end that defaulted during the quarter.
Speaker Change: Leaving us with only five loans 30, plus days delinquent.
Gregory A. Florkowski: These three new defaults had little impact on our overall loan loss reserves, though, because we already adjust forecasted losses upward when establishing our CECL reserves for exactly these types of unknown or unexpected events. As I have shared routinely throughout this tightening cycle, our at-risk portfolio is performing very well, and we are actively gathering year-end financial information for our entire portfolio.
Speaker Change: These three new default had little impact on our overall loan loss reserves, though because we already adjust forecasted losses upward when establishing our seasonal reserves for exactly these types of unknown or unexpected events.
Speaker Change: As I've shared routinely throughout this tightening cycle, our at risk portfolio is performing very well.
Speaker Change: We are actively gathering yearend financial information for our entire portfolio.
Gregory A. Florkowski: And with most of the data already collected, the weighted average debt service coverage ratio remains over two times, with most of the collaterals in our portfolio generating more than twice their annual debt service payments. With over 90% of our portfolio being fixed-rate loans, and limited maturities over the next two years, we continue to feel very good about credit. As I mentioned earlier, our business model generates strong cash flow, and we ended Q1 with $217 million of cash on the balance sheet after paying bonuses, earn-out installments, and our quarterly dividends. Given our strong financial position, our Board of Directors approved a quarterly dividend of $0.65 per share yesterday, payable to shareholders at a record as of May 16, consistent with last quarter's dividend.
Speaker Change: Most of the data already collected the weighted average debt service coverage ratio remains over two times.
Speaker Change: With most of the collateral than our per foot portfolio generating more than twice the annual debt service payments over.
Speaker Change: Over 90% of our portfolio being fixed rate loans.
Speaker Change: And limited maturities over the next two years, we continue to feel very good about credit.
Speaker Change: As I mentioned earlier, our business model generates strong cash flow and we ended Q1 with $217 million of cash on the balance sheet after paying bonuses.
Speaker Change: Installments and our quarterly dividend.
Speaker Change: Given our strong financial position.
Speaker Change: Our board of directors approved a quarterly dividend of <unk> 65 per share yesterday payable to shareholders of record as of May 16.
Speaker Change: Consistent with last quarter's dividend.
Gregory A. Florkowski: When we spoke to you in February, we struck a cautious tone with respect to market conditions and our expected Q1 financial results. So far, our expectation that the GSEs will lend at similar levels to 2023 has been correct. And though our pipeline with Fannie and Freddie is growing, we still believe that the GSEs will not meaningfully surpass their 2023 lending volume this year. One month into the second quarter, our clients are adapting to quote-unquote hire for longer and adjusting their business plans accordingly.
Speaker Change: Let me spoke to you in February.
Speaker Change: Mark a cautious tone with respect to the market conditions and our expected Q1 financial results.
Speaker Change: So far our expectation that the Gse's will lend at similar levels to 2023 has been correct.
Speaker Change: And though our pipeline with Fannie and Freddie is growing we still believe that the gse's will not meaningfully surpassed our 2023 lending volume this year.
Speaker Change: One month into the second quarter, our clients are adapting to quote unquote higher for longer.
Speaker Change: And adjusting their business plans accordingly.
Gregory A. Florkowski: While some deals will need to be adjusted, or even reworked, many deals remain on track. Our pipeline of closed and signed deal flow for the second quarter is already 35% above the level closed for all of Q1. This is a positive indication that many clients are looking to transact rather than push transactions further and further into the future. Provided rates remain stable, we expect the market to adjust, and as Willie will discuss momentarily, there are several green shoots across our business that give us confidence we can achieve the goals we laid out for the full year during our last call.
Speaker Change: While some deals will need to be adjusted or even reworked many deals remain on track.
Speaker Change: Importantly, our pipeline of closed and signed deal flow for the second quarter is already 35% above the level close for all of Q1.
Speaker Change: A positive indication that many clients are looking to transact rather than push transactions further and further into the future.
Speaker Change: Provided rates remain stable, we expect the market to adjust and as Willie will discuss momentarily. There are several green shoots across our business that give us confidence we can achieve the goals we laid out for the full year during our last call in fact.
Gregory A. Florkowski: In fact, although diluted EPS started slowly this year, our adjusted EBITDA and adjusted core EPS are in line with our full-year expectations through the first quarter. We still have the ability to achieve our 2020 core guidance for diluted EPS, adjusted core EPS, and adjusted EBITDA, with the expectation that activity will pick up as the year progresses, and a majority of our earnings will be generated in the second half of the year.
Speaker Change: Although diluted EPS started slowly this year, our adjusted EBITDA and adjusted core EPS are in line with our full year expectations through the first quarter.
Speaker Change: We still have the ability to achieve our 2020 core guidance per diluted EPS adjusted core EPS and adjusted EBITDA with the expectation that activity will pick up as the year progresses and a majority of our earnings will be generated in the second half of the year.
Gregory A. Florkowski: We feel very good about the team we have in place, our ability to guide our clients through these challenging markets, and our ability to grow rapidly when the market turns. Thank you for your time this morning. I will now turn the call back over to Willie.
Speaker Change: We feel very good about the team we have in place our ability to guide our clients through these challenging markets and our ability to grow rapidly when the market turns thank.
Speaker Change: Thank you for your time this morning, I will now turn the call back over to Willie.
Willie: Thanks, Greg.
William Mallory Walker: As the financial results that Greg just ran through show, we have a strong business model that enables us to weather market downturns while continuing to invest in our people, brand, and technology to grow market share in the second term. And while it is exceptionally difficult to predict when the cycle will turn, we are seeing promising signs that investors have given up hope of lower rates soon and begun to work higher for longer into their refinancing, acquisition, and disposition decision making.
Willie: As the financial results that Greg just ran through show.
Willie: We have a strong business model that enables us to weather market downturns, while continuing to invest in our people brand and technology to grow market share when the cycle turns.
Willie: And while it is exceptionally difficult to predict when the cycle will turn.
Willie: Promising signs with investors given up hope for lower rates.
Willie: And began to work higher for longer into their refinancing acquisition.
Willie: Physician decision, making.
William Mallory Walker: If 2023 was a wait-and-see year, 2024 may end up being the year when the clock runs out on refinancings, capital deployment, and waiting for rate cuts that don't materialize. As I mentioned previously, over half of our Q1 debt brokerage volume of over $3 billion was non-multifamily, reflective of the need for capital across all CRE assets. WND is known for multifamily, but as we have shown, our bankers and brokers expertly provide capital solutions across all CRA asset classes, and we will continue doing so. We had a slow Q1 with the GSEs. So did everyone else.
Willie: 2023 was a wait and see year 2024 may end up being the year when the clock ran out.
Willie: Refinancings capital deployment waiting for rate cuts don't materialize.
Willie: As I mentioned previously over half of our Q1 get brokerage volume of over $3 billion was non multifamily.
Willie: Reflective of the need for capital across all CRE asset classes.
Willie: <unk> is known for multifamily, but as we have shown our bankers and brokers expertly provide capital solutions across all CRE asset classes, and we will continue doing so.
Willie: We had a slow Q1 with the GSE.
Speaker Change: So did everyone.
William Mallory Walker: The current pipeline of signed applications and rate-locked GSE loans for Q2 is already larger than what we rate-locked in all of Q1, but that is off of a very low base. As the GSEs achieve their Affordable Lending Goals and gain confidence that their loan losses won't become a problem, it is our expectation that they will step into the market more in coming quarters. Our multifamily property sales team issued more broker opinion of value, excuse me, more broker opinion of value or BOVs during Q1-24 than in any previous quarter, yet only closed $1.2 billion of transactions, versus $9.3 billion at the peak of the post
Willie: Our current pipeline of signed applications in rate lock GSE loans for Q2 is already larger than what we rate locked in all of Q1.
Willie: But that is off of a very low base.
Willie: <unk> achieved their affordable lending goals and gained confidence that their loan losses don't become a problem. It is there.
Willie: Our expectation that they step into the market more in coming quarters.
Willie: Our multifamily property sales team issued more broker opinion excuse me more broker opinion of value or <unk> during Q1, 'twenty four than in any previous quarter.
Willie: We had only closed $1 $2 billion of transaction volume versus $9 3 billion at the peak of the post pandemic acquisition binge.
William Mallory Walker: The quantity of BOVs being requested hopefully translates into a more fluid acquisitions market as would-be sellers accept current market conditions and begin transacting. Blackstone's announcement to acquire Air Communities for $10 billion felt like the beginning of a new cycle, although the subsequent surge in interest rates over the past three weeks seems to have tempered the market's excitement. The Blackstone acquisition is reflective of three current market dynamics. First, there is a ton of equity capital that has been on the sidelines for almost two years and needs to be deployed.
Willie: The quantity of <unk> is being requested hopefully translate into a more fluid acquisitions market would be sellers, except to current market conditions and began transacting.
Willie: Blackstone's announcement to acquire air communities for $10 billion felt like the beginning of a new cycle.
Willie: Yet the subsequent surge in interest rates over the past three weeks seems to have tempered the market's excitement.
Willie: The Blackstone acquisition is reflective of three current market dynamics first there's a ton of equity capital that has been on the sidelines for almost two years and needs to be deployed.
William Mallory Walker: Second, while nobody knows exactly where the bottom of this cycle is, we are close to the bottom or beginning to recover. And third, quote, I'm waiting for rate cuts, unquote, is really not a reasonable statement, given where the macroeconomy sits today.
William Mallory Walker: Second while nobody knows exactly where the bottom of this cycle is we are close to the bottom or beginning to recover.
Willie: Third.
Speaker Change: I'm waiting for rate cuts unquote is really not a reasonable statement.
William Mallory Walker: Given where the macro economy sits today.
William Mallory Walker: Furthering the positive signs for equity flows, Blackstone's B-Rate had the lowest redemption requests in March of the past 23 months and was able to meet all redemption requests for the second consecutive month. As the largest non-trade REIT pivots from net seller to net buyer, it will spur transactions that have been absent from the market for the past several quarters. At the beginning of the year, we structured our senior management team, promoting Kris Mikkelsen and Don King to run our capital markets business, Sherry Thompson to run our affordable lending business, and Allison Williams to run our small balance lending, all reporting to me.
Furthering the positive signs for equity flows blackstone's be REIT had the lowest redemption requests in March of the past 23 months and was able to meet all redemption requests for the second consecutive month.
Speaker Change: As the largest non traded REIT pivots from net seller to net buyer.
William Mallory Walker: Will spur transactions that had been absent from the market for the past several quarters.
William Mallory Walker: At the beginning of the year, we structured our senior management team promoting Chris Nicholson and Don King to run our capital markets business Sheri Thompson to run our affordable lending business and Alison Williams throughout our small balance lending all reporting to me.
William Mallory Walker: I am both pleased and extremely excited to see how these senior leaders have not only jumped into their new leadership roles but have driven increased collaboration across WND. And it is very evident as I meet with clients that our small company touch and feel combined with our large company capabilities is winning. WND sits in a unique position in the market, where we go head to head with the large banks and service companies that have tens, if not hundreds of thousands of employees, and then with the smaller boutique companies that don't have the recurring revenue streams that we have to continue investing in their people, brands, and technology during challenging markets.
William Mallory Walker: Im both pleased and extremely excited to see how these senior leaders.
William Mallory Walker: Not only jumped into their new leadership roles that have driven increased collaboration across WMD.
William Mallory Walker: And it is very evident as I meet with clients that are small company touch and feel combined with our large company capabilities is winning.
William Mallory Walker: <unk> sits in a unique position in the market, where we go head to head with the large banks and service companies that have tens if not hundreds of thousands of employees.
William Mallory Walker: And then the smaller boutique companies that don't have the recurring revenue streams that we have to continue investing in our people brand and technology during challenging markets.
William Mallory Walker: This market dynamic presents a huge opportunity for WND to differentiate itself and continue gaining market share. Our long-term growth strategy, the Drive to 25, continues to underpin the way we manage our business through up and down markets. We continue to focus on achieving our ambitious goals, knowing that the strategy is the right one for our business over the long term and will enable us to return to our track record of growth and outperformance.
William Mallory Walker: This market dynamic presents a huge opportunity for WNS to differentiate ourselves and continue gaining market share.
William Mallory Walker: Our long term growth strategy to drive the 25 continues to underpin the way, we manage our business through up and down markets. We.
William Mallory Walker: We continue to focus on achieving our ambitious goals knowing that the strategy is the right one for our business over the long term and will enable us to return to our track record of growth and outperformance.
William Mallory Walker: I'd like to thank our team for their continued hard work and for everything they do every day to meet our clients' needs, win against the competition, and grow WMD's brand in the market. Thank you for your time this morning. I will now turn the call over to the operator to open the line for any questions.
William Mallory Walker: I'd like to thank our team for their continued hard work and for everything they do every day to meet our clients' needs win against the competition and grow Wmd's brand in the market.
Speaker Change: Thank you for your time. This morning, I will now turn the call over to the operator to open the line for any questions.
Operator: 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 your mute function is turned off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. We'll go first to Jade Rahmani on KBW.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Operator: Again, Please press star one to ask a question.
Operator: We will go first to Jade Rahmani with K B W.
Jade Joseph Rahmani: Thank you very much.
Jade Joseph Rahmani: Thank you very much. When you look at the landscape, do you see any interesting market share gain opportunities? You know, it's clear that the banks are going to pull back on commercial real estate lending. And WND is a specialist in multifamily, a creator of credit products. Interest-earning assets could potentially increase its market share in the business. Where do you see the biggest opportunity?
Operator: Yes.
Jade Joseph Rahmani: When you look at the landscape do you see any.
Jade Joseph Rahmani: Interesting market share gain opportunities.
Jade Joseph Rahmani: Clear that the banks are going to pull back in commercial real estate lending and WD is a specialist in multifamily a creator of credit products.
Jade Joseph Rahmani: Earning assets could potentially increase its market share in the business, where do you see the biggest opportunities for that.
Unknown Attendee: Unknown Attendee
William Mallory Walker: Good morning, Jade, and thanks for joining us. The first thing is obviously to maintain our leadership position with the GSEs, given their role in the market and given the mortgage servicing rights that we generate when we originate loans at the GSEs. So after a slow Q1, as I just said, and as Greg just said, the pipeline looks good for Q2, and we're seeing them step into the market more. HUD had a slow start to the year.
Jade Joseph Rahmani: Yeah.
Speaker Change: Good morning, James and thanks for joining us.
William Mallory Walker: <unk>.
William Mallory Walker: The first thing is obviously to maintain our leadership position.
William Mallory Walker: With the Gse's given their role in the market and given the mortgage servicing rights that we generate when we originate loans with gse's. So after a slow Q1 as I, just said and as Greg just said.
William Mallory Walker: Pipeline looks good.
William Mallory Walker: For Q2, and we're seeing them step into the market more.
William Mallory Walker: Hot had a slow start to the year end.
William Mallory Walker: HUD's one of those businesses that, quite honestly, the amount of time it takes to get a loan done at HUD, you can't really look at that on a quarterly basis, but we've got a fantastic team, and we are seeing people start to put shovels in the ground to develop assets that will deliver in two or three years. If you look at the numbers, Jade, as it relates to deliveries in 2024, where you're still having a significant amount of multifamily deliveries into the high-growth markets, there's a significant step down from five to 600,000 units to somewhere between two and 300,000 units that are projected to deliver in 26 and 27 right now.
William Mallory Walker: It's one of those businesses that quite honestly a lot of time it takes to get a loan done it hard.
William Mallory Walker: You can't really look at that on a quarterly basis, but we've got a fantastic team and we are seeing people start to put shovels in the ground.
William Mallory Walker: To develop assets that will deliver in two or three years.
William Mallory Walker: If you look at the numbers Jade as it relates to deliveries in 2024, where youre still having a significant amount of multifamily deliveries into the high growth markets.
William Mallory Walker: There is a significant step down from five to 600000 units to.
William Mallory Walker: Somewhere between two and 300000 units that are projected to deliver in 2006 and 27 right now.
William Mallory Walker: And so people are seeing that opportunity.
William Mallory Walker: And so people are seeing that opportunity and, as construction costs have come down, are starting to put shovels into the ground to build and deliver new product in a couple years from now. And then, as we just discussed, as it relates to our capital markets business, we've generally speaking been somewhere around eight to 10% of total multifamily lending volume in the country on the broader overall capital markets number, all CRE lending.
William Mallory Walker: As construction costs have come down are starting to put shovels into the ground to build.
William Mallory Walker: And deliver new product in a couple of years from now.
William Mallory Walker: And then as we just discussed as it relates to our capital markets.
William Mallory Walker: We've.
William Mallory Walker: We have generally speaking been somewhere around 8% to 10% of total multifamily.
William Mallory Walker: Lending volume in the country.
William Mallory Walker: On the broader overall capital markets number all CRE lending.
William Mallory Walker: We've got about a 2% market share. So as you see the other asset classes that need capital, the ability for our debt brokerage team to place capital on office, retail, hospitality, and industrial is enormous. And so there's the real opportunity for us to pick up market share in that broader capital markets business. And then, finally, if you look at investment sales, as I just said, we've never been busier as it relates to working with our clients to show them what the value of their assets is.
William Mallory Walker: Got about a 2% market share so as you see the other asset classes that need capital the ability for our debt brokerage team to place capital on office retail hospitality and industrial.
William Mallory Walker: Is enormous.
William Mallory Walker: So there is the real opportunity for us to pick up market share in that broader capital markets business.
William Mallory Walker: Then finally if.
William Mallory Walker: If you look at investment sales.
William Mallory Walker: As I just said.
William Mallory Walker: Never been busier as it relates to working with our clients to show them.
William Mallory Walker: The value of their assets are.
William Mallory Walker: The hope is that we're not doing that from a sort of, let's just appraise what the value is and return that number to our investors, but that the appraisals and BOVs that we're doing are getting people ready to actually transact. But it was a slow start to the year from the investment sales side across the market. But given the team that we've invested in and what I consider to be the very best multifamily investment sales platform in the country, we have a real opportunity to continue to move up in the lead tables there.
William Mallory Walker: The hope is that we're not doing that from a sort of let's just appraise what the value is in return that number to our to our investors.
William Mallory Walker: But that the appraisals in <unk> that we're doing is getting people ready to actually transact.
William Mallory Walker: But it was a slow start to the year from the investment sales side across the market.
William Mallory Walker: But given the team that we've invested in and what I consider to be the very best multifamily investment sales platform in the country. We have a real opportunity we continue to move up you'll be tables there.
Jade Joseph Rahmani: Thanks for that. On the credit side, it still remains benign, but there was an uptick. What trends are you seeing, maybe on a forward-looking basis on credit? Seems like you're not concerned, but I would hope for a comment on that.
William Mallory Walker: Thanks for that on the credit side still remains benign did have an uptick.
Jade Joseph Rahmani: Are you seeing maybe on a forward looking basis on the credit it seems like youre not concerned, but we would hope for a comment on that.
Jade Joseph Rahmani: Yeah.
William Mallory Walker: You know, Greg went through in great detail the loans that we both repurchased as well as a very small Delinquency number relative to the size of the portfolio. As he also underscored, 92% of our at-risk portfolio is fixed rate law. And I also pointed out that the agencies, and we had very few maturities in 2024, that's all good from a credit standpoint, but it obviously puts a lot of pressure on our origination team to go outside of Walker & Dunlop's portfolio and find new loans.
Jade Joseph Rahmani: Greg went through in great detail.
William Mallory Walker: The loans that we both.
William Mallory Walker: Repurchase as well as.
William Mallory Walker: A very small.
William Mallory Walker:
William Mallory Walker: Delinquency number relative to the size of the portfolio.
William Mallory Walker: As he also underscored 92% of our at risk portfolio was fixed rate loans.
William Mallory Walker: And I also pointed out that the agencies and we have very few maturities in 2024.
William Mallory Walker: That's all good from a credit standpoint, it obviously puts a lot of them.
William Mallory Walker: It puts the onus on our origination team to go outside of Walker, <unk> portfolio and find new loans.
William Mallory Walker: But investors have to remember, Walker & Dunlop, you know, when I joined this firm in 2003, we had a $5 billion servicing portfolio. So the growth from $5 billion to $132 billion has been going out and, essentially, stealing deal flow from the competition. And as I said in my prepared remarks, over 75% of our Q1 loan originations were new loans to Walker & Dunlop. We have a track record of doing that, and we'll continue to do that.
William Mallory Walker: Investors have to remember Walker and Dunlop when I joined the firm in 2003, we had a $5 billion servicing portfolio. So the growth from $5 billion to $132 billion has been going out and essentially.
William Mallory Walker: Stealing deal flow from the competition.
William Mallory Walker: And as I said in my prepared remarks.
William Mallory Walker: Over 75% of our Q1, our loan originations were new loans to walk in Milwaukee, We have a track record of doing that and we will continue to do that so we got to go out and find new hours to put into the portfolio, but we have very little refinancing risk in the portfolio today.
William Mallory Walker: So we have to go out and find new loans to put into the portfolio, but we have very little refinancing risk in the portfolio today. I think this sense that rates are higher for longer, Jade, people are getting used to it. It's going to cause some problems in the CLO market. I think that a lot of people have been sitting there looking at the CLO market, waiting for rates to come down, which might save the deal.
William Mallory Walker: I think the sense that rates are higher for longer Jade.
William Mallory Walker: People are getting used to it.
William Mallory Walker: It's going to cause some problems in <unk>.
William Mallory Walker: In the CLO market.
William Mallory Walker: I think there are a lot of people have been sitting there looking at the CLO market waiting for rates to come down that might save.
William Mallory Walker: Save the deal.
William Mallory Walker: Those deals that have CLO debt on them are either hitting the wall where they're going to become foreclosures, or they're getting recapitalized. The thing we have consistently seen in the multifamily space is that there is fresh equity capital to step in and buy assets at a discount. The question is, how much is the seller willing to discount the property? I think the sense that we're in a higher for longer rate environment says that people are sort of coming to grips with that, not hoping that rates are going to bail out the deal.
William Mallory Walker: Those deals that have CLO debt on them are either.
William Mallory Walker: Hitting the wall or where they're going to become a foreclosure.
William Mallory Walker: Or they're getting recapitalized. The thing we have consistently seen in the multifamily space is that there is fresh equity capital to step in and buy assets at a discount. The question is how much is the seller willing to discount the property and I think the sense that we're in are higher for longer rate environment says that people.
William Mallory Walker: Or sort of coming to grips with that not hoping that rates are going to bail out the deal and they either have to go find new equity to come into the property or give up the property and let new ownership come in and take it over.
William Mallory Walker: They either have to find new equity to come into the property or give up the property and let new ownership come in and take it over. But very, very, very distinct from post-GFC, where you didn't have the equity capital ready to step in and play, nor, in some instances, the debt capital. Today, there is a huge amount of equity capital looking to jump into the market at any kind of discount to current values.
William Mallory Walker: But very very very distinct.
William Mallory Walker: Post Dfc, where you didn't have the equity capital ready to step in and play nor in 17 the debt capital today. There is a huge amount of equity capital looking to jump into the market at any kind of discount to current values.
Jade Joseph Rahmani: Thanks for taking the questions.
Speaker Change: Thanks for taking the questions.
Speaker Change: Thank you.
Steven Cole DeLaney: We'll go next to Steve Delaney with Citizens JMP.
Jade Joseph Rahmani: We'll go next to Steve Delaney with citizens J M P.
Steven Cole DeLaney: Good morning, Willie and team. Thanks for taking the question. So Willie, you commented on the GSDs, and I think, I don't want to misquote you, but your view that they would work very hard to try to meet their 70 billion goal this year.
Steven Cole DeLaney: Good morning, Willy and team. Thanks for taking the question, but will you commented about the GST needs and I think I don't want to misquote you, but your.
Steven Cole DeLaney: Your view that they would.
Steven Cole DeLaney: We've worked very hard to try to meet their 70 billion goal this year.
Steven Cole DeLaney: Steve, let me just jump in on that. What Greg said was that it is our expectation that they repeat 23 volumes in 24, which says that right now our expectations are that the two of them will come in somewhere in the mid-50s and not at that $70 billion number. Boy, would we love for them to get to that $70 billion number, but what we're essentially saying is we're parroting what they told us in Q1, which is that they told us in Q1 that we think 24 will be a redo of 23.
Steven Cole DeLaney:
Speaker Change: Let me just jump in on that Jay Steve Let me just jump in.
Steven Cole DeLaney: What what Greg said was it is our expectation that they repeat 23 volumes in 'twenty, four which says that right now our expectations are the two of them come in somewhere in the mid fifties and not at that $1 billion number boy would we love for them to get to that $70 billion number, but what we're essentially saying.
Steven Cole DeLaney: As we're parroting, what they told us in Q1, which as they told US in Q1, we think 24 will be a redo of 23 and in our last earnings call I said I was a little bit.
Steven Cole DeLaney: And then on our last earnings call, I said I was a little bit surprised by them telling us that given the volume of refinancing out there that they could step into. The Fannie Mae Dust Conference is going on this week. I know they are very focused on trying to deploy as much capital as they can and be a very significant market participant, and so that's all encouraging words. If you look at the volume in Q1 that both we and they did, you have to sit there and say they're on track right now to do a repeat of 23 in 24.
Steven Cole DeLaney: A little bit surprised by them, telling us that and given the volume of refinancing out there that they can step into.
Steven Cole DeLaney: Yes, the Fannie Mae dust conferences going on this week I know they are very focused on trying to deploy as much capital as they can be a very significant market participant.
Steven Cole DeLaney: So that's all encouraging words, if you look at the volume in Q1 with both we and they did you have to sit there and say they are on track right now to do a repeat of 'twenty three in 'twenty four but if we see a pickup in activity in two end of Q2 Q3 Q4.
Steven Cole DeLaney: But if we see a pickup in activity into the end of Q2, Q3, Q4, they very much have the ability to get to their caps of $70 billion. But right now, we're not seeing that in the pipeline.
Steven Cole DeLaney: Very much have the ability to get to their caps of $70 billion, but right now we're not seeing that in the pipeline.
Steven Cole DeLaney: Thank you very much for clarifying that. What I found interesting is expanding their basket.
Speaker Change: Got it thank you very much for clarifying that.
Steven Cole DeLaney: I found interesting is.
Steven Cole DeLaney: Do they have the administrative flexibility? without having to go to Congress or anything? Within the FHFA and the GSE, do they have the internal flexibility to modify their LTVs, the DSCRs? Can they broaden, broaden the basket, if you will, to try to get any more money out to serve the market?
Steven Cole DeLaney: Expanding their basket.
Steven Cole DeLaney: <unk> had the administrative flexibility.
Steven Cole DeLaney: Without having to go to Congress or anything within the FHFA did.
Steven Cole DeLaney: Do they have the internal flexibility to modify.
Steven Cole DeLaney: Ltvs.
Speaker Change: Yes yards.
Steven Cole DeLaney: Can they broaden broaden the basket if you will to try to.
Steven Cole DeLaney: More more money out to serve the market.
William Mallory Walker: Sure. So let me just give you a couple quick examples of that. They do. The first is on that lease-up example that I gave. Could they drop down?
Speaker Change: Sure. So let me just give you a couple of examples on that.
William Mallory Walker: Did they do.
William Mallory Walker: The first is on that that lease up example that I gave.
William Mallory Walker: Could they dropped down.
William Mallory Walker: The lease percentage or units occupied number to be able to step in earlier on lease up deals they can.
William Mallory Walker: And I've spoken directly with the regulator about that vary.
William Mallory Walker: That opportunity that sits there.
William Mallory Walker: The other is that, you know, a lot of banks want to move collateral off of their balances, and so Freddie has a program called the Q Series, which allows them to go and securitize tools of multifamily loans that are sitting on the bank balance. Fannie could do that if they wanted to, but they aren't today.
William Mallory Walker: The other is that a lot of banks want to move collateral off of their balance sheets.
William Mallory Walker: So Freddie has a program called Q series, which allows them to go and securitized pools multifamily loans that are sitting on bank balance sheets.
William Mallory Walker: And there's a little bit of a difference there in the sense that the K-series is a pooled asset securitization model, whereas the DUST program is a single asset mortgage-backed security model. But with that said, Fannie could also mimic what Freddie is doing to try and provide liquidity to the banking sector right now if it wanted to move collateral off its balance sheets and get it securitized. Those are two examples, but there are other areas, preferred equity, for instance.
William Mallory Walker: Penni could do that if they wanted to they are today.
William Mallory Walker: And Theres, a little bit of a difference there in the sense that the K series.
William Mallory Walker: It's a it's a pooled asset securitization model, whereas the best program is a single asset mortgage backed security model, but with that said Danny could also mimic what Freddie is doing to try and provide liquidity.
William Mallory Walker: To the banking sector right now.
William Mallory Walker: If they want to move collateral off of their balance sheets and get it securitized. Those are two examples but there are other areas preferred equity for instance.
William Mallory Walker: We can put preferred equity today with ease onto Freddie Mac financing. Fannie's a little bit more challenging to put preferred equity onto them. So both agencies have the ability to be more entrepreneurial to then deploy capital. That preferred equity, Steve, is super important. If you've got a debt fund loan that was SOFR plus 300, it's now at 8.5%, you can swap into a fixed rate agency execution in the high fives or low sixes, depending on where the 10-year is.
William Mallory Walker: We can put preferred equity today with ease on to Freddie Mac financings standards, a little bit more challenging to put preferred equity onto them. So both agencies had the ability to be more entrepreneurial to then deploy capital debt that preferred equity Steve is super important if you're if you've got a debt fund.
William Mallory Walker: Loan.
William Mallory Walker: It was so for plus 300.
William Mallory Walker: Now at eight 5%.
William Mallory Walker: You can swap into a fixed rate.
William Mallory Walker: Agency execution in the high fives low six percents, depending on where the tenure is.
William Mallory Walker: And, but you can't do that at the current leverage level. So we sit there and look at a loan that has a debt, you know, is it a 90% LTV loan? We're only lending at 65% LTV with the agencies. So how do you, how do you fill that gap? You fill that gap either with common equity or with preferred equity. And so they are working with us to be able to do preferred equity, and Walker & Dunlop has a fund with a very large sovereign wealth fund to put preferred equity into agency deals. That's the type of thing that will allow borrowers to work out some of the problems that exist today and get a structure that works for them in the long term.
William Mallory Walker: And but you can't do that at current leverage levels.
William Mallory Walker: Can you comment on how large the fund, the PREF equity relationship is?
William Mallory Walker: So when we sit there and look at a loan that had a that sir.
William Mallory Walker: Is it a 90% LTV loan, we're only lending at 65% LTV with the agencies. So how do you how do you fill that gap you can fill that gap ear with common equity with preferred equity and so working with us to be able to do preferred equity and Walker and Dunlop has a fund.
William Mallory Walker: With a very large sovereign wealth fund to quit preferred equity into agency deals.
William Mallory Walker: That's the type of thing that will allow borrowers to work out some of the problems that exist today and get a structure that works for them in the long term.
Speaker Change: Can you comment on how large the.
William Mallory Walker: The.
William Mallory Walker: The farm the prep equity relationship is.
William Mallory Walker: Okay.
William Mallory Walker: Our PREP Equity Relationship. Yeah, sure.
William Mallory Walker: <unk> equity relationship.
William Mallory Walker: We are first. Our first separate account that we did with that investor was $250 million. We deployed that very quickly, and we are right now refreshing that fund with that large investor.
William Mallory Walker: Sure.
Speaker Change: Our first our first separate account that we did with that.
William Mallory Walker: <unk> was $250 million, we deployed that very quickly and we are right now we're refreshing that fund with that large investor.
William Mallory Walker: Wow.
Speaker Change: Okay. Thanks.
William Mallory Walker: One quick follow up bridge lending you know you've been involved your comments about the banks, obviously pulling back there. There's just a huge supply we see it with the public commercial mortgage Reits vintage 2021, 2022 bridge loans.
William Mallory Walker: Nothing nothing is getting.
William Mallory Walker: Done in three turned in three years everything having to be extended.
William Mallory Walker: Obviously, you are becoming more favorable to lenders.
William Mallory Walker: Do you see WD, you know, increasing its bridge lending to take advantage of some of those opportunities when they're properly recapitalized, you know, whether it's with the existing borrower or with a new borrower coming in? So could we see more bridge loans directly on WD's balance sheet or within your joint venture that you have?
William Mallory Walker: You see WD.
William Mallory Walker: Increasing your bridge lending to take advantage of some of those opportunities when they are properly recapitalized.
William Mallory Walker: Whether it would be existing ball or with a new bar, we're coming yet so could we see more bridge loan directly on <unk> balance sheet or within your joint venture that you have.
William Mallory Walker: So the joint venture that we have, as you know, Steve, has not been very active. And I would, I would tell you that that is, is more to do with our partner not really wanting to put more capital out right now than it is Walker & Dunlop wanting to put capital out. As it relates to our balance sheet, I would put forth to you that Greg has been extremely good, and extremely protective of the capital that we have at Walker & Dunlop to both continue to invest in bringing all of our on production talent at a time when we believe that bringing on production talent is extremely important to continue to invest in the platform, investing in some of the funds that we're raising at Walker & Dunlop Investment Partners, and then maintaining a very healthy cash position, as you just said, which is over $200 million coming out of Q2, excuse me, coming out of Q1.
William Mallory Walker: So the joint venture that we have as you know Steve has not been very active.
William Mallory Walker: Brian.
William Mallory Walker: I would tell you that that is has more to do with our partner not really wanting to put more capital out right now, but it is walker and Dunlop wanting to put capital out.
William Mallory Walker: As it relates to our balance sheet I would put forth to you that Greg has been extremely good and.
William Mallory Walker: An extremely protective.
William Mallory Walker: The capital that we have at Walker and Dunlop to both continue to invest.
William Mallory Walker: And bringing on production talent.
William Mallory Walker: At a time when we believe that bringing on production talent is extremely important to continue to invest in the platform.
William Mallory Walker: Investing in some of the funds that we're raising at Walker and Dunlop investment partners.
William Mallory Walker: Maintaining a very healthy cash position as he just said which is over $200 million.
William Mallory Walker: Coming out of Q2, excuse me coming out of Q1.
William Mallory Walker: And so.
William Mallory Walker: I would tell you that loading up the balance sheet with bridge loans right now is clearly not our strategic focus and at the same time, when we have important strategic deals to get done us either doing the bridge loan or investing in the bridge loan with a third party is an important thing for us to be able to do it's why we.
William Mallory Walker: And so I would tell you that loading up the balance sheet with bridge loans right now is clearly not our strategic focus. But at the same time, when we have important strategic deals to get done, us either doing the bridge loan or investing in the bridge loan with a third party is an important thing for us to be able to do. It's why we have capital on our balance sheet, and we have a history of doing just that. So it's strategic, more than it is programmatic, if that makes sense.
William Mallory Walker: Capital on our balance sheet, and we have a history of doing just that so its strategic more than it is programmatic if that makes sense.
Gregory A. Florkowski: Got it. Yes. And I'll let Steve out. Steve, one thing, sorry to interrupt you, but I'll just add on to what Willie said. So absolutely, right; trying not to use the balance sheet to execute that strategy. But our Walker & Dunlop investment partners did close a round of funding with a large insurance company in the fourth quarter of last year. We mentioned it on our call last quarter. It was a $150 million raise. We've since levered that situation up.
Speaker Change: Got it yes.
Gregory A. Florkowski: Steve.
Speaker Change: Steve One thing sorry to interrupt you, but I will just layer on to what Willie said.
Gregory A. Florkowski: Absolutely.
Steve: Right trying not to use the balance sheet to execute that strategy, but our Walker and Dunlop investment partners did close a round of funding with a large insurance company in the fourth quarter of last year, we mentioned that on our call last quarter.
Speaker Change: It was $150 million raise.
Gregory A. Florkowski: So we have about half a billion dollars through that fund. And that's kind of the anchor investment to try to raise a larger fund. So we're very much in the process of trying to pull the capital together and pull different capital sources to try to meet that opportunity. But as Willie said, not on our balance sheet, but certainly finding ways with our access to capital and deal flow to do it.
Speaker Change: Since lever that up so we have about a half a billion dollars through that fund and that's kind of the anchor investment to try to raise a larger fund. So we're very much in the process of trying to pull the capital together and pool different capital sources to try to meet that opportunity but.
Gregory A. Florkowski: As Willie said not on our balance sheet, but certainly youre, finding ways and with our access to capital and deal flow to do it.
Gregory A. Florkowski: That's helpful. Thanks, Greg. And it seems that there is this opportunity to fix this huge basket of broken or stressed bridge loans. But probably we should think of your opportunity as one that is more advisory and bringing in supplemental capital to fix a broken loan rather than just replacing the bridge loan kind of de facto. Is that the right way to think about it?
Speaker Change: That's helpful. Thanks, Greg and it seems that there is this opportunity.
Gregory A. Florkowski: Fix this huge.
Gregory A. Florkowski: Basket of broken or stress bridge loans.
Gregory A. Florkowski: We should think of Europe opportunity is one that is more advisory and bringing in supplemental capital to fix a broken loan rather than just replacing the bridge loan kind of de facto is adequate.
Gregory A. Florkowski: Right way to think about it.
Speaker Change: Greg I'll take that.
Gregory A. Florkowski: Right.
Greg: I think that's fair.
Gregory A. Florkowski: Yes.
Steven Cole DeLaney: https://thevenusproject.com The fair characterization, but I think there will be opportunities for us to refinance those bridge loans through the fund business. So I would think of us as a solutions provider, and it just won't be on our balance sheet where we have, you know, we're underwriting the loans, and we have a co-investment in that fund. So we're shoulder to shoulder with our partner, but the lion's share of the capital and the lion's share of the risk sits with the capital partner versus us.
Greg: Fair characterization, but I think there will be opportunities for us to refinance those bridge loans through the fund business. So I would think of us as a as a solutions.
Steven Cole DeLaney: <unk> provider.
Steven Cole DeLaney: And it just won't be on our balance sheet, where we have.
Steven Cole DeLaney: We're underwriting the loans and we have a co investment in that fund.
Steven Cole DeLaney: We're shoulder to shoulder with our partner, but the lion's share of the capital in mind sharing the risk sits with the capital partner versus us and that's exactly why we started building WD IP and that's how we're how we're using that opportunity and the ability to raise capital.
Steven Cole DeLaney: And that's exactly why we started building WDIP, and that's how we're using that opportunity and the ability to raise capital from a bunch of different investors to meet that demand. It's out there, and we're actively in the process of raising, That's helpful. Thank you.
Steven Cole DeLaney: From a bunch of different investors to meet that demand that's out there and where we're actively in the process of raising it.
Steven Cole DeLaney: That's helpful, and thank you both for your comments this morning.
Speaker Change: That's helpful. Thank you both for your comments this morning.
Speaker Change: Thanks, Steve.
Steven Cole DeLaney: Okay.
Brian Vialino: We'll go next to Brian Vialino with Gleadbush Securities.
Steven Cole DeLaney: We'll go next to Brian <unk> with Wedbush Securities.
Brian Vialino: Great. Good morning.
Brian Vialino: Great. Good morning, Thanks for taking my questions.
Brian Vialino: You know there's been a lot of talk about CRE maturities, increasing this year in that.
Brian Vialino: There is some of those maturities that were extension that had been pushed from 2023 and you talked about it a bit earlier in the call, but just given where rates have gone are you anticipating that the 2020 for mature you all could be pushed out further.
Brian Vialino: And have a negative impact on transaction volumes from extension activity is that something that you saw happen in the first quarter.
Brian Vialino: Brian we clearly saw it in.
Brian Vialino: I guess, when we look at the maturity schedules.
Brian Vialino: We're looking at an annual maturity schedule, we're not necessarily February March.
Brian Vialino: July what have you, but we clearly saw.
Brian Vialino: A lot of sort of extensions in Q1.
Brian Vialino: Thanks for taking my questions. You know, there's been a lot of talk about CRE maturities increasing this year and that, you know, there's some of those maturities that were extensions that have been pushed back to 2023. And you talked about this a bit earlier in the call, but just, you know, given where rates have gone, are you anticipating that the 2024 maturity wall could be pushed out further and have a negative impact on transaction volumes from extension activities? Is that something that you saw happening in the first quarter?
Brian Vialino: And I would also say to you I mean Q1 was a at.
Brian Vialino: The psychology of the market was we're coming into rate cuts in March we're ready to have.
Brian Vialino: Our cost of capital and let's just wait and then all of a sudden it shifted and everyone said, Oh gosh, Okay, well I was planning on waiting and now I'm not sure that I can wait and I think that what we're seeing in the market right now clearly from our pipeline is that people are saying okay. This is the reality.
Brian Vialino: This is the rate environment, we're going to have to transact in on our refinancing on a sale on a purchase let's adjust our numbers and let's see if we can get to work.
William Mallory Walker: Brian, we clearly saw it in... I guess it's when we look at the maturity schedules, we're looking at an annual maturity schedule and not necessarily February, March, jail July, what have you. But we clearly saw a lot of sort of extensions in Q1. And I would also say to you, I mean, Q1 was a psychological market, we're coming into rate cuts in March, we're ready to have, you know, lower costs to capital, and let's just wait. And then all of a sudden, it shifted. And everyone said, Oh, gosh, okay. Well, I was planning on waiting. And now I'm not sure that I can wait.
Brian Vialino: And so I.
Brian Vialino: I do believe that the Q1 was this sort of it was the transitional quarter.
William Mallory Walker: And I think that what we're seeing in the market right now, clearly from our pipeline, is that people are saying, Okay, this is the reality. This is the rate environment we are going to have to transact in on a refinancing, on a sale, on a purchase. Let's adjust our numbers, and let's see if we can get to work.
William Mallory Walker: It was coming out of 'twenty, three saying rates are going down in 'twenty four is going to be kind of game on as it relates to transaction activity, but let's wait for those cuts to come and then all of a sudden Q1 change the narrative and so we're very clearly seeing as someone who might have pulled a property in Q4, because they thought they were selling it at <unk>.
William Mallory Walker: Two lower price because rates were going to drop and therefore cap rates, we're also likely to drop.
William Mallory Walker: A lot of those properties is now being put on the market and said, let's get it moved let's go I need the capital there.
William Mallory Walker: And so I do believe that Q1 was this sort of, it was the transitional quarter. It was, you know, coming out of 23, saying rates are going down, and 24 is going to be kind of game on as it relates to transaction activity. But let's wait for those cuts to come. And then all of a sudden, Q1 changed the narrative.
William Mallory Walker: So I think we're seeing a shift in the mentality and specifically to how much it is extend and pretend versus I'm gonna called alone and have come our way.
William Mallory Walker: I think a lot of banks.
William Mallory Walker: That have a.
William Mallory Walker: They are current.
William Mallory Walker: Performing commercial real estate loan, that's earning them Super plus 300.
William Mallory Walker: They'd like to keep that on their books.
William Mallory Walker: They like that.
William Mallory Walker: No reason for them to have that pay off and I would also say to you a number of people on in bank real estate departments are also thinking if they were to get a payoff. They don't know theyre going to get the capital back to go redeploy it on a new loan so they'd like to keep their outstandings up.
William Mallory Walker: The issue with it is particularly in multifamily is that that's expensive capital you can get a lot cheaper capital. If you were to go and refinance at the agencies or with hot.
William Mallory Walker: So as a result of that piece.
William Mallory Walker: People the borrowers are saying I'd like to see if I can move it out of that into something else with your in office retail hospitality that may be the best you're going to get.
William Mallory Walker: But the <unk> market is is is surprisingly strong right now.
William Mallory Walker: Spreads on agency lending are relatively tight.
William Mallory Walker: From a historic standpoint.
William Mallory Walker: And so what we're very clearly seeing is someone who might have pulled out a property in Q4 because they thought they were selling it at too low a price, because rates were going to drop, and therefore cap rates were also likely to drop. A lot of those properties are now being put on the market and said, "let's get it moved. Let's go."
William Mallory Walker: And so there is alternative capital out there for people to look and the real question is is the bank extending the best alternative or is there other capital that will come in at a cheaper cost to them and quite honestly, that's our team's job everyday to meet with our clients and show them what alternative capital can provide.
William Mallory Walker: I need the capital there. And so I think we're seeing a shift in the mentality, and specifically to how much is extend and pretend versus I'm going to call the loan and have it come our way. I think a lot of banks that have a current performing commercial real estate loan that's earning them SOFR plus $300. They'd like to keep that on their books. They like that.
William Mallory Walker: Rather than extending with the banks.
Speaker Change: Great. Thank you and one more question.
William Mallory Walker: All the commentary on the credit and the loan repurchase request from Fannie and Freddie I guess, just any sort of indications or expectation that loan repurchase request.
William Mallory Walker: Be increasing from here on out or do you think these are more sort of one off issues as of right now.
William Mallory Walker: There's no reason for them to have that payoff. And I would also say to you, a number of people in bank real estate departments are also thinking if they were to get a payoff, they don't know if they're gonna get the capital back to go redeploy it on a new loan. So they'd like to keep their outstandings up.
William Mallory Walker: There's nothing we're seeing that the you know that.
William Mallory Walker: The issue with it, particularly in multi-family, is that it's expensive capital. You can get a lot cheaper capital if you were to go and refinance at the agencies or with HUD. So as a result of that, people, the borrowers are saying, I'd like to see if I can move it out of that into something else. If you're in, you know, office, retail, hospitality, that may be the best you're gonna get.
William Mallory Walker: But the CMBS market is surprisingly strong right now, and spreads on agency lending are relatively tight from a historic standpoint. And so there is alternative capital out there for people to look at. And the real question is, is the bank, YouTube, or the link in the description below?
William Mallory Walker: <unk>.
Brian Vialino: Great, thank you. And one more question.
William Mallory Walker: Loan purchase requests a lot of one thing that I want to be really clear with here.
Brian Vialino: I appreciate all the commentary on credit and the loan repurchase request from Fannie and Freddie. Do you think there are any indications or expectations that loan repurchase requests could, you know, be increasing from here on out? Or do you think these are more sort of one-off issues as of right now?
Brian Vialino: Family business, Fannie and Freddie is very distinct from their single family business people here are loan repurchases and they get kind of freaked out thinking back to 2007 in line low single family mortgage market had lots of repurchases from Fannie and Freddie This is wholly different reserve single asset.
William Mallory Walker: There's nothing worth seeing in the, you know, those loan prepurchase requests. A lot of the one thing that I want to be really clear about here. The multifamily business of Fannie and Freddie is very distinct from their single family business. People hear loan repurchases, and they get kind of freaked out, thinking back to 2007 when the single family mortgage market had lots of repurchases from Fannie and Freddie. This is wholly different
William Mallory Walker: These are single asset, very specific situations. And as Craig, I think, underscored, we have bent over backwards to be a very, broader partnership going forward after having stepped in on those loans. And fortunately, we have the financial wherewithal to do just that and to work them out. But we did that to be a great partner.
William Mallory Walker: Very specific situations and.
William Mallory Walker: As Greg I think underscored we have and.
William Mallory Walker: And over backwards to be a very.
William Mallory Walker: Cooperative partner with Fannie and Freddie on the three buybacks that we have done.
William Mallory Walker: We have gone well beyond what our responsibility is on.
William Mallory Walker: On two of those loans to partner.
William Mallory Walker: Not be contentious and saying that's not our responsibility that's your responsibility and as a result of that I'm very hopeful that that then in genders, a bigger tighter broader partnership going forward after having stepped in on those loans and Fortunately, we have the financial wherewithal to do just that and to work them out.
William Mallory Walker: But we did that to be a great partner.
William Mallory Walker: And so, I don't see anything right now, as Greg said very clearly, we have no other loans in our portfolio that would lead us to believe there are any other repurchases coming up. And, as I said, I believe that as Fannie and Freddie get to their affordable housing goals and realize that the credit in their portfolios is very strong, they will start to lean into the market as we move through the year.
William Mallory Walker: And so I don't see anything right now as Greg said very clearly we have no other loans in our portfolio.
William Mallory Walker: It would lead us to believe there are any other repurchases coming up.
William Mallory Walker: And as I said, I believe that as Fannie and Freddie get to their affordable housing goals and realize that the credit in their portfolios is very strong that they start to leading the market as we move through the year.
Brian Vialino: Got it. Very helpful. Thank you.
Speaker Change: Got it very helpful. Thank you.
Speaker Change: Thank you Brian.
Derek Summers: We'll go next to Derek Summers with Jeffrey.
Brian Vialino: Well go next to Derrick <unk> with Jefferies.
Derek Summers: Hi, good morning, everyone. Just with your commentary on the brokered volumes shifting to more non-multifamily property types. You know, is that expected to, does your pipeline suggest that it'll continue into 2Q, and do you think you're properly staffed to handle that next?
Derek Summers: Hi, Good morning, everyone just with your commentary on the brokered volumes shifting to more non multifamily property types.
Derek Summers: Is that expected to does your pipeline suggest that will continue into <unk> and do you think you are properly staffed.
Derek Summers: The handle that mix.
William Mallory Walker: A good question. Very much, the pipeline shows that there is continued growth in that line of business. And I would tell you, Derek, that the rate I don't need to tell you that every major private equity firm has a big debt fund, and they're all looking for opportunistic lending, and when you come to them with an opportunity to lend on a commercial real estate asset, that SOFR plus 400, they sharpen their pencils and get going very quickly.
Speaker Change: A good question very much the pipeline shows that there is continued.
William Mallory Walker: Growth in that line of business.
William Mallory Walker: And I would tell you Derek that the the rates.
William Mallory Walker: The coupon rates that we are deploying that capital at in some instances just make my eyes. It's been in the sense that it's a sofa plus 400 deal itself.
William Mallory Walker: It's a 10, 11% coupon rate.
William Mallory Walker: There is a lot of that there's a lot of equity capital out there Theres also a lot of that capital out there I don't need to tell you that.
William Mallory Walker: Every major private equity firm has a big debt funds and they're all looking for opportunistic lending and when you come to them with an opportunity to lend on commercial real estate asset that so for plus 400.
William Mallory Walker: They sharpen their pencils and get going very quickly.
William Mallory Walker: And so.
William Mallory Walker: There is a there's a huge amount of that capital out there and one of the great things that WD has as we've got the client relationships to be the conduit for that capital to be deployed.
William Mallory Walker: And then we also have Walker & Dunlop Investment Partners, where, as Greg mentioned a moment ago, we've got a Guardian fund, we've got a PAC Life fund, we've got a number of relationships with large capital sources to deploy both equity capital as well as debt capital directly into our deal flow. So, our distribution network is A, very valuable, but B, it's a great conduit to deploy capital, and we're doing just that today outside of multifamily and outside of the GSEs.
William Mallory Walker: And then we also have Walker <unk> Dunlop investment partners, where as Greg mentioned a moment ago.
William Mallory Walker: We've got.
William Mallory Walker: A Guardian fund, we got a Pac life fund, we've got a number of relationships with large capital sources to deploy both equity capital as well as debt capital directly into our deal flow So our distribution network.
William Mallory Walker: Is he is a very valuable but b, it's a great conduit to deploy capital and we're doing just that today.
William Mallory Walker: Outside of multifamily and outside of the Gse's.
Derek Summers: Got it. Thank you. And then just on the dynamics of what portion of that brokered volume is flowing through to your servicing portfolio? Is that only the multifamily assets? Or if you could share any color there, that would be helpful.
Speaker Change: Got it. Thank you and then just on the dynamics of.
Derek Summers: What portion of that brokered volume is flowing through to your servicing portfolio is that definitely the multifamily assets or maybe if you could share any color there that would be helpful.
Derek Summers: Yeah.
Derek Summers: That's a great question. Craig, do you have one?
Speaker Change: That's a great question.
Craig: Greg do you have do you have data on that.
Gregory A. Florkowski: I don't have the percentages for you, Derek, but we can definitely get that.
Craig: I don't I don't have the percentages for you Derek we can definitely get that but I will tell you it's usually on a.
Craig: It's on a capital relationship perspective, not necessarily an asset class perspective, so we have sub servicing relationships with life insurance companies and different sources of capital. So when we execute a deal if they're a partner capital partner that does office will service those office loans.
Gregory A. Florkowski: But I'll tell you, it's usually from a capital relationship perspective, not necessarily from an asset class perspective. So we have subservicing relationships with life insurance companies and different sources of capital. When we execute a deal, if they're a partner, a capital partner that does offices, we'll service those office loans. So it's more capital specific than it is, property type specific. But we can spend a little bit of time getting you those numbers.
Gregory A. Florkowski: So I'd say its more capital specific one it is.
Gregory A. Florkowski: Pretty type specific.
Gregory A. Florkowski: But we can we can spend all their time get you those numbers and I always say.
William Mallory Walker: And the only thing on that, Derek, as you well know, those servicing fees. We love them, and they're great. And we have a number of capital providers, as Greg just said, that pay us subservicing fees. But in comparison to taking risk on a Fannie Mae loan or capitalizing a mortgage servicing right over the life of a loan that is prepayment protected, we do not capitalize these servicing rights.
Speaker Change: On that Derek Derek as you well know those those servicing fees, we love them and they are great and we have a number of capital providers as Greg just said the payoffs sub servicing fees, but in comparison to taking risk on a Fannie Mae loan where were capitalizing the mortgage servicing right over the life of a.
William Mallory Walker: A loan that is prepayment protected we do not capitalize these servicing rights. So we do not look out and say, we expect that loan to be on for 10 years, and we're going to back into a number we just take that as revenue. So it'll be a four basis 0.6 basis point servicing fee and we just take it in as revenue as the loan sits on our books.
Derek Summers: So we do not look out and say we expect that loan to be on for 10 years, and we're going to back into a number. We just take that as revenue. So it'll be a four basis point or six basis point servicing fee, and we just take it in as revenue as the loan sits on our books. We don't capitalize it, so that's just an important thing to keep in mind as it relates to the capital market side of the business versus our agency and HUD numbers. Got it. Yeah, that's helpful.
Derek Summers: Got it. Yeah, that's a helpful color. Thank you for answering my question.
Derek Summers: Don't capitalize it so that's just an important.
Derek Summers: Thing to keep in mind as it relates to the capital market side of the business versus our agency in high demand days.
Derek Summers: Got it yeah that's helpful color.
Speaker Change: Thanks, Greg So all my questions.
Operator: This does conclude the questions and answer portion of today's call. I would like to turn the call back over to Willie Walker for any closing remarks. Thank you, everyone, for joining us today. I appreciate it.
Derek Summers: This does conclude the question and answer portion of today's call I would like to turn the call back over to Willy Walker for any closing remarks.
William Mallory Walker: Thank you everyone for joining us today. I appreciate the time and focus on Walker & Dunlop.
William Mallory Walker: Thanks, everyone for joining us today and appreciate.
William Mallory Walker: I appreciate the time and focus on Walker and Dunlop and I would reiterate my thanks to the WNBA team.
William Mallory Walker: For all of their hard work.
William Mallory Walker: And I hope everyone have a great day.
Operator: This does conclude today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: This does conclude today's conference call. Thank you for your participation you may now disconnect.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Okay.
Operator: [music].