Jay McCanless: Thank you, Willy. The second question I had, and apologies if I’m misconstruing this, but it sounded like you guys are potentially kind of doing a reset on single family for rent. Maybe talk about where your efforts are there now and it seems like from what we’ve seen from the headlines, the public SOFR companies are still getting pretty good same store rent growth. So maybe talk about where W&D is on that now? And then also kind of what you’re seeing from the operators that you’ve worked with?
Willy Walker: So we have a team that’s very focused on the SOFR space, and they’ve been deploying quite a bit of capital. It’s challenging in that the agencies don’t lend on SOFR, they [indiscernible] non-BFR. So for those who don’t know the acronyms that Jay and I are talking about, single family rental versus built-for-rent, the agencies will lend on build-for-rent. They won’t lend on single family rental. And so finding capital Jay has been challenging and it’s one of the reasons why as the banking sector gets displaced, we believe that there’s going to be an increased demand for debt brokerage capabilities because the banker that developers have worked with four times says we are not lending anymore and they don’t know where to turn to for capital.
It would shock you if you looked through our Q2 debt brokerage list of capital sources. How many of them, Jay, you don’t know? They’re not household names. They’re small banks that you seemingly wouldn’t think would make a commercial real estate loan in various markets that are showing up, to, because they need to deploy capital because they like the fundamentals of the commercial real estate that they’re lending on. And so we believe that that’s very positive for our debt brokerage business as the market feels and recovers. The other thing that I would say is SOFR as an asset class is doing very well and should continue to do very well. What we are seeing is that because the majority of Americans who own a home have a very low interest expense, fixed rate mortgage on their home, they are not putting that supply into the market.
So, the existing home sales market is in the gutter and will stay there for quite some time. People will move, people will have needs to buy a new home because they have got a larger family, they’ve got a new job, what have you. But the existing sales market is very, very depressed right now because everyone has cheap financing on their home and they don’t want to lose that 3.5% mortgage for a 6.5% mortgage. That means that the only new supply coming onto the market is new construction. And those newly built homes are coming in at a price point that is thoroughly unaffordable to most renters in America. The cost of financing, the down payment and the overall cost of the home are unaffordable to most renters, which means that they have two options stay renting in an apartment building or move into single family rental.
And so we see that space, both multi-family as well as single-family rental as having great growth dynamics over the next several years as the single-family market is really delivering new product at a price point that is not achievable by most renters and that the existing home market basically stays depressed because people don’t want to lose the benefit of that 3.5% fixed rate mortgage.
Jay McCanless: Got it. Where you were talking about the small banks and some names that we wouldn’t know on the list does, is that part of what you said in the prepared remarks that roughly 60% of your loans this quarter are new loans, new borrowers, new investors. I guess, I thought that was…
Willy Walker: No.
Jay McCanless: Pretty interesting and encouraging stat, other side of it. Okay.
Willy Walker: Yes, but these are – so it’s – they are new loans to Walker & Dunlop Jay. So, it’s not that it’s a new capital source. If I showed you the capital source list, it would probably be even more new providers of capital if you will. We did a loan in Q2 with a bank called Sunshine Bank. I have to tell you, no disrespect to Sunshine Bank, but I have never heard of Sunshine Bank before. And so, what we’re talking about in that 60% number is that 60% of the loans that we financed in Q2 were new loans to Walker & Dunlop. So, the loan that we were refinancing was a loan that was originated previously by Wells Fargo, CBRE, some other provider and we went and refinanced that loan for the borrower, where the capital source came from is a distinct view, but we’re talking about the fact that in our portfolio, we do not need to rely on refinancing volume in our existing $127 billion servicing portfolio.
We are going out and stealing financing from the competition because we’ve invested in Galaxy and because we have visibility into our clients’ portfolios to be able to go meet with them and say, this isn’t a Walker & Dunlop loan, but we would love to work on the refinancing of that asset. And that has been a huge value add to our bankers and brokers as it relates to having somewhat of an x-ray into our client and borrowers’ portfolios.
Jay McCanless: That’s great to hear, Willy. My last question, if you think about getting back on offense, are there potential M&A opportunities for WD out there, just given the fact that, like you talked about higher interest rates for everyone some people may have gotten off side in terms of how their capital structure looks.
