Since Bethesda, Md.–based Walker & Dunlop went public in December 2010, the real estate finance firm has seen its stock valuation increase by 20.5 percent, besting most, if not all, real estate, financial sector, and small-cap stock indices. Due in no small part to the company's performance as a multifamily lender, the firm's growth surge looks to continue in 2012.
Company chairman, president, and CEO Willy Walker sat down with Apartment Finance Today to talk about the new year.
What are the stressors and opportunities for multifamily finance in 2012?
The real constraint right now from a lending standpoint is on cash flow and cash-flow coverage. If we have someone coming in and doing an acquisition at a reasonably low cap rate, they're going to be constrained from an LTV standpoint, and the mechanism we would look for is whether the deal has the cash flow to be able to support it.
How is sponsorship and the capitalization of apartment firms affecting deal flow?
There's a ripple effect that takes place at this time in the cycle where the buyers who lost out on the bidding for core-plus deals still want to deploy capital; they still like the fundamentals of multifamily, and those buyers progressively move geographically out of the core as they seek to put capital to work. As all of that plays into the supply of capital, Fannie Mae and Freddie Mac are lending broadly across the country. Do the underwriting guidelines vary by location and asset class? Sure they do. But the GSEs are putting out a significant amount of capital in multifamily. As a result, if you have good sponsorship and a good asset that's performing, you can get financing in today's market at extremely attractive interest rates.
How is GSE reform likely to affect that financing availability, if at all?
Because multifamily has done so well, it remains a very attractive asset class. There is thus a coherent argument to be made that the private sector would step into the apartment [niche] and do what Fannie and Freddie do in a heartbeat. But until the federal government puts out a road map to allow private capital to react to whatever they're going to do with Fannie and Freddie, they won't get that capital coming back.
How will you look to grow this year and beyond?
We want to be a top-five Fannie Mae DUS lender, a top-five Freddie Mac seller servicer, and a top-five HUD FHA originator. Our strategy is adding feet on the street, adding new origination talent across the country in our nine offices, and staying focused on our core agency business. Another piece of the strategy is to grow our lending products. We have an interim loan fund today to take multifamily deals that aren't stabilized to GSE standards and do an interim loan for lease-up or repositioning that then allows them to do a take-out loan with one of the agencies. We're actively looking at deals to lend on with that fund.