Multifamily Finance Racer
How do you transform a privately held real estate lender from 45 employees and value of $50M into a public powerhouse of 500 employees, 24 offices and market cap of $820M? A keynoter at our upcoming national multifamily conference in LA should know.
Because that's exactly what Willy Walker (pictured with wife Sheila last week in Sun Valley, ID) achieved over the last 10 years as CEO of Maryland-based Walker & Dunlop. Today his multifamily-focused firm is the No. 1 Fannie Mae lender and No. 3 for Freddie Mac (behind Berkadia and CBRE). All told, it's the 13th-largest commercial real estate lender in the US, with a peer group that includes household names like JP Morgan, Wells Fargo, MetLife, Key Bank and BB&T; and it's one of the Big 5 of multifamily financing besides Wells Fargo, CB, HFF and Berkadia.
Willy's a lifelong competitive athlete (college lacrosse and Boston Marathon time of 2:36), who just got a new super-light Scott mountain bike with electric gear shifter. Which brings us back to his secrets to growing his company. One, he says, is to go to top liberal arts colleges and seek out student athletes who are disciplined and ambitious. Then, teach them financial underwriting, rather than loan origination, so when they originate loans they do it from a credit point of view. In turn, this aligns with his own background in investment banking and private equity, where he learned how to acquire and integrate companies. That skill has been instrumental in growing his firm, compared to many competitor firms, he notes, whose leaders are mortgage bankers inclined to grow mainly by originating more loans.
Another aspect of W&D's competitive culture, Willy (here showing that clients at a summer conference can also be part of it) says, is being tenacious. A prime example? Its determination to go public in 2010 even though it was the middle of the recession and, with Fannie and Freddie in conservatorship, when "mortgage" was a four-letter word "We got thrown curveball after curveball," Willy says, but they endured an eight-month process to get it done, which has allowed them to access the capital needed to grow. They catapulted into the top ranks when they were able to acquire CW Capital in 2012, and now have a $46B servicing portfolio that provides $100M a year in revenues, meaning stability in the event of a down cycle in originations. Willy says they also benefit from focus: setting a clear vision to become the premier (not necessarily largest) commercial real estate finance company in the US. They purposely don't operate outside the US though they have been brought many opportunities; and they don't do leasing or property management like a JLL or CBRE.
Here's Willy, right, with former DC mayor Adrian Fenty and Fenty's brother getting ready to race; we don't believe this is his business attire, but he does (metaphorically) race at work as well. Other firm initiatives have included launching a conduit in partnership with Fortress that's done hundreds of millions in originations; acquiring Johnson Capital to add scale to their mortgage brokerage platform; and in April introducing a major new service line by acquiring Engler Financial as a first step into investment sales. The latter initiative is a logical and potentially huge supplement to their business: Previously they were brought in to finance a property only after the decision had been made to buy or sell; now, Willy says, they can be more strategic with clients, helping them find or decide on transactions knowing the available financing.
As to the first question on your mind, reader, Willy is not short: Bill Walton is really tall. As to your second question, what of the future for multifamily, here's what Willy tells us: GSE regulator FHFA issued a great scorecard recently for Fannie and Freddie—something few could have imagined even two years ago—and granted them relief from lending caps reached early in the year after unexpectedly huge volume. It's expecting them in return to apply their resources particularly to specialty products like small loans for affordable, workforce and manufactured housing that policymakers want them to do, but money is amply available for other multifamily as well. Willy points out that multifamily properties typically trade at 25 to 50 basis points inside other commercial cap rates due to a consistent supply of capital and fundamentals of rental housing, and that nothing on the horizon suggests a change in the consistent supply of capital.
Willy and his family hub out of Sun Valley during the summer as W&D continues out the West Coast—he'll be in SF and LA this week, Denver and Seattle in two weeks, and Phoenix and Dallas in three weeks. Few sports have gone unconquered; here he is with his three boys at pickup hockey. Walker & Dunlop is already in its third generation; we don't see a problem with succession planning down the road.
