Walker & Dunlop, Inc. Price & Performance (WD)

It comes from the team. And it certainly WNB has never been a macro play. Many of the companies we compete against are macro plays. They're [indiscernible] If the market is moving positive, they move positively. If the market goes down, they move down. We have tried to be somewhat of the yin and the yang or the [indiscernible] I will say our total shareholder return in 2024 was disappointing. We lagged in 2024 versus the competition. And our investors have my commitment and our team's commitment to continue to focus, compete and outperform going forward. And that's due to the investments we've made and the positioning of the firm Appreciate those additional comments, Willie, and all the best for 2025. Thank you. Thanks, Steve. We'll hear next from Jay McCanless from Wedbush. Hey, good morning everyone.

So I just wanted to touch on the comment you made in the prepared remarks. About clients accepting the higher rates and looking to still do deals. This is probably a loaded question, but is Extend and Pretend done? Because I know you Walker about it in your comments, Willie, but if clients really are having to deal with higher rates are we finally going to see some assets and especially some problem assets get worked out and turned over this year? [indiscernible] Your question is a very good one. It's a It's a hard one to give a a broad general response to. What we are seeing is that many borrowers who have floating rate debt on an asset would like to swap that debt into a fixed rate loan but in many instances cannot because it would require a cash in refinancing. And so what we find ourselves confronted with daily is clients at Walker and Dunlop saying I'd like to refinance this existing financing. It's either turning or I just don't like the overall floating interest rate on it. We go to underwrite a fixed rate loan and find that to be able to do a fixed rate loan and bring down the effective cost of borrowing, it's going to require a recapitalization from the equity side.

The client will say, I don't want to go back to my L and ask for a capital call on this asset. And they will either stick with the existing financing or they will put the property up for sale if they happen to have a realized gain on the value of the asset. We saw a lot of that at the end of twenty twenty four and we're seeing that continue To your specific question as it relates to does that then cost distress in the markets? [indiscernible] You cannot look at the amount of both equity capital and debt capital that is out in the market today and say that distressed opportunities don't have the opportunity to be worked out.

That may will result in certain investors, certain owners taking a loss on the property. But what that doesn't allow for is any broad scale distress as it relates to overall market movement. So what I would think will happen quite a bit in 2025 is the clock will run out on certain either fund life or asset level financings. And the ability to extend into the future won't present itself. As I said in my prepared remarks, how much of the outstanding maturities actually get called in 2025 versus extended into the future? Will make a difference between whether this is an enormous debt refinancing market or whether it is a moderate debt refinancing market as I put forth in the Mortgage Bankers Association predictions for 2025. Think the most important thing from a Walker and Bellhop standpoint is to make sure that we are there with our clients to help them work through any of these situations. Whether that means they just want to do a straight out refinancing whether they have to do a cash in refinancing, whether they want to sell the asset or whether they want to bring in new partners to reacquire the asset.

Thank you for that, Willie.

The second question I had last call you talked about the possible timeline for the GSEs coming out. Maybe like 2026, 2027 any updates to your thoughts on that process? Yes, for a second.

Look, the new HUD Secretary mentioned last week that The privatization of Fannie Mae and Freddie Mac, should be on the radar screen and focused on The President Trump has mentioned the same during the campaign. To my knowledge, he has not mentioned it subsequent to his inauguration. And the Treasury Secretary was asked during his confirmation hearings about the privatization of Fannie Mae and Freddie Mac.

So the topic is clearly on the table. The real question will be is it an issue they focus on in 2025? As a potential offset to the tax bill and either continued continuation of the Tax Cuts and Jobs Act or new tax cuts that President Trump would like to have implemented and using the privatization of Fannie and Freddie as an offset to those tax cuts. If it stays related to the tax bill, [indiscernible] probably gets on the fast track and gets very focused on in 2025. And that would be both very interesting and exciting because were it tied to the tax bill, there would be a lot of political will behind getting it If it's misses the '25 window and being related to paired with the tax bill, it turns back to the old debate as it relates to Fannie and Freddie will take an end to conservatorship, Should they stay in the federal government? Should they be spun back out? How are they spun back out? What are their footprints when they get spun back out? Is it a explicit guarantee? Is it an implicit guarantee? Does it go administrative action? Does it go legislative action?

Etcetera, etcetera.

And so were it to miss the window on tax bill I would lower my odds that something actually gets done with Fannie and Freddie just because we've seen this happen before you're into the midterm elections in 2026.

And it's a very complicated, difficult issue to get either consensus on Capitol Hill or the political will inside of the West Wing to get something like that done. But if it stays on the radar screen for 2025 in conjunction with the tax [indiscernible] I think it could be very exciting and very interesting to see how it evolves.

All right. Thank you for that, Willie. One more for me. Excited to hear you guys are expanding into hospitality. Maybe give us a thumbnail of how you're thinking about that market and especially with what at one point was some overcapacity there, would love to get your thoughts on that one. And thank you for taking all my questions. Sure, Jamie. [indiscernible] what we have seen in our multifamily business is that we were one of the largest multifamily lenders in The United States. And back in 2015, decided to move into multifamily investment sales. And with the acquisition of Engler Financial, and under the great leadership of Chris Mickelson, we have seen that and expand tremendously and be an incredible both standalone business a business that is enhanced our relationship with multifamily owner operators and developers tremendously and also allowed for the timing of investment sales into financing on a scale that we quite honestly never Projected. Rate of tying our financing to the investment sale we ever projected when we entered this business to start with. So what we have and one of the other things for people to remember in all of that is the following.

If you look at the agency league tables, Fannie and Freddie. A decade ago, their league tables at a number of large banks at the top of the lien tables because they were big partners to the agencies and they did a lot of multifamily financing. You look at the lead tables today and the tops of the lead tables, are only broad financial real estate services firms such as Walker and Dunlop such as CBRE, [indiscernible] have the combination of investment sales tied in with financing. And so that's been the competitive landscape today. You can go to the client and provide them with one stop shopping, if you will, And so as a result of that, we look at that example in multifamily and we say, need to do that in hospitality. We need to do that in retail.

So bringing on the hospitality investment sales team in Q4 was a very significant move for us move to another vertical. Interestingly, Jay, there are eight very large number of investors in multifamily who also happen to be investors in hospitality. And so if you look at the existing client relationships that Walker and Delop has, from a multifamily both investment sales and financing standpoint, Many of them also had been borrowers of Walker and Dunlop on the hospitality side. And now we've just added in the investment sales capability in the hospitality market As it relates to the underlying macro fundamentals, of hospitality As you well know, leisure, hospitality, Urban hospitality, not so much. Clearly, there are certain urban assets that have done exceedingly well, but there are also some urban centers I can just poke it San Francisco for a moment that have a lot of distressed core hospitality assets that have very much struggled since the pandemic due to few people coming back to work and few people traveling to those major urban centers. So look, there's a huge opportunity in that market.

For Walker and Dunlop to to grow and we feel like we have hired a fantastic team to spearhead those efforts And as I said in my prepared remarks, we will continue to add both to our hospitality investment sales capabilities as well as focus on adding investment capabilities into other commercial real estate asset classes. Sounds great. Thanks guys. Appreciate it. Thank you, Jay.

Reminder that it is a followed by the digit one if you have We'll hear next from a follow-up from Jade Rahmani from KBW.

Thank you very much.

I was wondering if you could give an update in terms of what you're seeing Fannie Mae volumes so far this year and also just looking at your historical mix between Fannie and Freddie, I think there could be a a decent opportunity to grow do you agree with that? So Jade, no No, as you well know, sort of give mid quarter volume guidance sort of what we're seeing generally speaking both agencies have started the year in typical fashion, if you will, get done with the previous year and refocus on what's coming ahead and go to conferences in January to meet with partners and clients and then sort of get back to work. So nothing to report on there as it relates to either Fannie or Freddie or their outlook for 2025. And as it relates to Freddie Mac, mentioned in our prepared remarks, we came in fourth with Freddie Mac in 2024. That was a a very solid year for us, but as you know very well, we fell one ranking point in the rankings. We were very close to the number three Freddie Mac up to go partner in 2024, but one of our other large competitors jumped ahead of us.

That's disappointing. We're very focused on climbing back up in the lead tables. And to your point, there's a huge opportunity. As I mentioned previously, Freddie Mac did $10,000,000,000 more multifamily lending in 2024 than Fannie Mae. And so as a result of that, we clearly would like to do more with Freddie Mac and would love to move not only back to where we were last year as number three, but higher on the Freddie Mac league tables. And so we have the team, we have the relationship with Fred and Mac, and we clearly have the client base to do just that. It's up to our team to go and do it.

Thanks a lot. Thank you, Jade.

And at this time, there are no additional callers in the I'd like to turn the conference back over to your host, Mr. Walker, for any additional or closing remarks.

Mr. Walker, please go ahead.

Thank you very much. As I said, at the end of the call, I want to congratulate and thank the WMD team for all they did in 2024 to make it the success that it was.

Thank you to Kelsey and Jenna from an IR standpoint for all your work in this earnings season and thank you Greg for your prepared remarks and exceptional work at W and D. That concludes the call for today and thank you everyone for joining us.