Steve DeLaney: Got it? Yes.
Greg Florkowski: And I’ll – Steve, one thing, sorry to interrupt you, but I’ll just layer on to what Willy 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 $150 million raise. We’ve since levered that up. So we have about $0.5 billion 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 as Willy said, not on our balance sheet, but certainly finding ways with our access to capital and deal flow to do it.
Steve DeLaney: Sure. 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?
Willy Walker: Greg, you want to take that? I think that’s fair, Steve.
Greg Florkowski: Yes, 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 — we’re underwriting the loans and we have a co-investment in that fund that we’re shoulder to shoulder with our partner. But the lion’s share of the capital and lion’s share of the risk sits with the capital partner versus us 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 it.
Steve DeLaney: That’s helpful. And thank you both for your comments this morning.
Willy Walker: Thanks, Steve.
Operator: We’ll go next Brian Violino with Wedbush Securities.
Brian Violino: Great. Good morning. Thanks for taking my questions. There’s been a lot of talk about CRE maturities increasing this year and that there’s some of those maturities that were extensions 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 2024 maturity wall could be pushed out further and have a negative impact on transaction volumes from extension activity? Is that something that you saw happening in the first quarter?
Willy Walker: Brian, we clearly saw it in — I guess, when we look at the maturity schedules, we’re looking at an annual maturity schedule and not necessarily February, March, July, what have you. But we clearly saw a lot of sort of extensions in Q1. And I would also say to you that, I mean, Q1 was a — the psychology of the market was coming into rate cuts in March, we’re ready to have lower 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, 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. And so, I do believe that the Q1 was this sort of — it was the transitional quarter. It was 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. And so what we’re very clearly seeing is someone who might have pulled 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. 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. 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 going to get the capital back to go redeploy it on a new loan. So they’d like to keep their outstandings up. 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 with 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 office, retail, hospitality, that may be the best you’re going to get. But the CMBS market is surprisingly strong right now. Spreads on agency lending are relatively tight from a historic standpoint. 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 every day to meet with our clients and show them what alternative capital can provide rather than extending with the banks.
Brian Violino: Great. Thank you. And one more question. Appreciate all the commentary on the credit and the loan repurchase request from Fannie and Freddie. I guess, just any sort of indications or expectations that loan repurchase requests could be increasing from here on out, or you think these are more sort of one-off issues as of right now?
Willy Walker: There’s nothing we’re seeing that loan purchase requests — a lot of — the one thing that I want to be really clear with here, the multifamily business at Fannie and Freddie is very distinct from their single-family business. People hear of 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. These are single-asset, very specific situations. And as Greg, I think, underscored, we have bent over backwards to be a very cooperative partner with Fannie and Freddie on the three buybacks that we have done. We have gone well beyond what our responsibility is on two of those loans to partner and not be contentious in saying, that’s not our responsibility, that’s your responsibility.
And as a result of that, I’m very hopeful that that then engenders 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. But we did that to be a great partner. 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, that they start to lean into the market as we move through the year.
Brian Violino: Got it. Very helpful. Thank you.
Willy Walker: Thank you, Brian.
Operator: We’ll go next to Derek Sommers with Jefferies.
Derek Sommers: Hi. Good morning, everyone. Just with your commentary on the brokered volumes shifting to more non-multifamily property types, 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 mix?
Willy Walker: 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 rates — the coupon rates that we are deploying that capital at, in some instances, just make my eyes spin, in the sense that it’s a SOFR plus 400 deal, it’s a 10%, 11% coupon rate. There is a lot of debt — there’s a lot of equity capital out there. There’s also a lot of debt capital out there. 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 at SOFR plus 400, they sharpen their pencils and get going very quickly.
And so, there’s a huge amount of debt capital out there. And one of the great things that W&D has is, we’ve got the client relationships to be the conduit for that capital to be deployed. 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.
Derek Sommers: 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.
Willy Walker: That’s a great question. Greg, do you have data on that?
Greg Florkowski: I don’t have the percentages for you, Derek. We can definitely get that. But I’ll tell you, it’s usually 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 or a capital partner that does office, 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 time and get you those numbers…
Derek Sommers: Got it.
Willy Walker: And the only thing, 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 sub-servicing fees. But in comparison to taking risk on a Fannie Mae loan where we’re capitalizing the mortgage servicing right over the life of 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 4 basis point, 6 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 hard lending.
Derek Sommers: Got it. Yes, that’s helpful color. Thank you for answering my questions.
Operator: 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.
Willy Walker: Thanks everyone for joining us today. Appreciate the time and focus on Walker & Dunlop. And I reiterate my thanks to the W&D team for all their hard work and I hope everyone has a great day.
Operator: This does conclude today’s conference call. Thank you for your participation. You may now disconnect.
