WD - Earnings call transcript Q2 2020

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Kelsey Duffey

Good morning. I’m Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop, and I would like to welcome you to Walker & Dunlop’s Second Quarter 2020 Earnings Conference Call and Webcast. Hosting the call today is Willy Walker, Walker & Dunlop’s Chairman and CEO. He is joined by Steve Theobald, Chief Financial Officer. Today’s call is being recorded and a replay will be available via webcast on the Investor Relations section of our website. participants floor placed analyst will the all mode a questions time, presentation. the and be this have in been listen-only following At open for to our This www.walkerdunlop.com. website, release we Instructions] Relations posted [Operator and of morning, presentation the our Investor section earnings will as Steve on These Willy slides some what call. reference a serve during for the point of and touch this Please EBITDA during adjusted non-GAAP financial call. also metric note that we will course reference of the the of this refer website reconciliation Please the for posted earnings financial our on non-GAAP to release metric. a Investors read in are forward-looking our the earnings to urged carefully statements release. language Statements facts, Litigation made the Reform forward-looking on meaning this be within XXXX. of call, which are not statements Securities Act may historical of Private the deemed

our no our actual events alter our filed expectations, and definition or describe can turn expressly as materially. be our results forward-looking so. More statements will statements, Walker result I otherwise. over We detailed the current in and future to to do now is information, call any to obligation risk of factors new whether disclaim the SEC. annual update Willy. of differ quarterly obligation found Forward-looking under a or with may & Dunlop reports

Willy Walker

our for of the have COVID-XX second adversely morning, our the we I can dive ones to the it’s lost present to to and affected Wednesday, that have into everyone. results. who and Dunlop, express began those our loved – webcast, downturn. Walker before pandemic quarter & but fantastic I want when But Walker the Kelsey, you, usually comments say, Thank the doing condolences aren’t Americans, begin concern to webcast Walker the reiterate good of on economic webcast about I been Wednesday, second support quarter a due by Since millions I it’s today, absolutely we and virus investors who

hope and be results virus jobs hard. QX control can there wish Dunlop’s great the & financial businesses hit extremely that individuals so are restored. And can have is businesses many been we our Walker exceptional, that While and and

since seen to certain have way work, benefited others pandemic, we advent changes damaged. and we forced and from badly live the have the the of been have As businesses the

record have & quarter back Walker origination Dunlop, and and we billion. exceedingly million sales generated $X.X the benefited strong of of on during $XXX revenues property the volume of For loan

entitled share at strategic meet billion popular billion due when in portfolio commercial servicing with of the Our of the over lending and people, coupled originations and end to were $X.X net pandemic, added a Walker the $X.X not for our of revenues, quarterly Vision Dunlop’s July officially $X.XX our our volume catapulted lending per quarter, This X-year in growth webcast. our highly of States volume our and did businesses year-over-year diluted half in in together pushing bankers & growth generate QX $XXX and brokerage better billion, of the year-over-year of strategy, earnings record our share thanks the Walker of total market with pillar and increasing XXXX. brokers of is origination GSEs came earnings explosive we in Freddie second with XX% GSEs databases the brokerage growth and and volume growth portfolio in last solution in achieving $X.X our debt highlights and real of entire All our to the the in were during to at proprietary dramatic servicing tripling half the Mae of the Fannie these integrated in retaining growth XXXX year. United the during in market plan first global quarter, property billion Revenue Mac to in technology had last market share growth the ambitious $X.X and from XX% enough an financing technology our to and And with to of the share midst from originated the attracting the QX estate HUD. first We with share branding investments team success we XXXX and XX.X%, we’ve loan new best through to billion quarter widely first from revenue clients’ working up entirely of lending significantly understand very nearly XX% in borrowing is XX% the development market to and needs investing remotely. record XX% the XXXX. curtailed, year industry, digital marketing the

year Our of with incredible Fannie XXXX, has lending an Mae’s XX% volume Dunlop the & of with first had to representing Mae, half the partnership which Fannie for total Walker year. back multifamily dates

& we but partner, of Dunlop. are in we Mae’s servicing have and means the X loans client in Fannie little not for only These this value billion Mae’s long-term relationships during bringing And portfolio, our new We new been that competition not performance rather largest Fannie last servicing our our best. their $X.X provide total rights Dunlop. were financing, lending existed & of but billion the Walker in we new taking when year business and leaves quarter, partner largest originated huge into X already $X.X that portfolio, loans our doubt mortgage very simply into servicing years. to clients from refinancing Walker

growing our HUD Freddie we growth as had strong this $XXX had X origination we middle loan Slide HUD quarter the million several note of in As this and in volumes quarter, growth column shows, And QX. origination XXXX of items far loan $XXX Fannie from our shows, largest explosive origination originations with in ever. by quarter, HUD million our are to There QX numbers. of in

the Walker being leader joined to our has financing. Sheri our in magnificent team an a lead HUD market & and ago Dunlop First, absolutely HUD job business, XX being months to done Thompson leader taking from

you, long time takes a HUD will the ever to Second, who done process as HUD in the originate happens nothing has ever anyone business and a financing tell quarter.

past our rates QX. in our rates due and volumes wildly happened, that not So over quarters. to HUD’s our was dropping But has in work year, becoming due the countercyclical and incredible competitive more in future the HUD benefit world HUD QX the fantastic to should team’s

QX, $X.X It we Finally, COVID the We of team’s given in the of with slow business, currently Walker our & Dunlop, first can closed $X.X they brokered are volume XXXX, properties particularly debt in XX% our for under billion at closing as brokerage the for million in volume very you QX QX, due crisis. team brokerage right see sales slowed York-based have we we of down place third-parties the QX Current to to our noteworthy brokered the were to we multifamily billion $XXX dislocation Similar the XX during of a QX in is team, based just seeing HUD accomplishment quarter in the the still in back considering the up from volumes, worth but in markets. where property sales our responsible strong pandemic. the QX XX% to to total epicenter New is debt that number QX. that quarter contract was and early debt market added pick and dramatically QX. business of

assets And capital billion HUD in goals. the outperforming rebuilding XXXX. XXXX annual well established servicing nicely in billion the $XX sales business in multifamily very achieved, of market. we our in was billion investment continue X-year our nicely, begins $X to billion financing, $XXX feel with if extremely ambitious remainder to revenues. XXXX of business and management debt GSE robust portfolio, very pipelines, annual under which annual $X positioned and market drive Vision to billion for of sales, return broader $X with as property would our rebounding loans So the of brokerage debt

slide $XX.X financing next hand in XXXX basis, we see $XX originating goal the this debt side debt last in $XX.X financing from shows XX-month X-year by after And the this in have billion established the trailing XXXX. $X.X XX%. growth of a after billion billion achieved financing debt As of $X.X is sales you months. on billion which of of of properties left Similarly, establishing of a over the a $X goal last chart, growth the of Vision goal slide as our shows, multifamily side annual we billion can to in loan of compound originations selling selling rate selling the property column billion on XX originating in this loans, right XXXX

at of billion. growth we grown the clearly And has as built compound of annual X and down the sales compound from I past or mentioned shows side we $XX.X slide servicing in this of billion growth business of an property have growth you servicing pandemic slowed business, growth to slide, dramatic XX%. over the in have XXXX past grown While growth $XXX past rate XX portfolio our to this billion to a over compound have $XXX have from over today, a a see team. XX%. X million and the portfolio can rate $XXX XXXX loan years previously the annual rate revenues, right the years, property at in our sales at in as annual incredible originations, XX% on months, The $XXX million this absolutely the grown

at-risk low. in annual our but of forbearance the all announced goal which during we in revenues, chasing close, number been the will of not So, requests to Vision this twice for our this quarter extremely brings remainder XXXX billion quite second continue $X the year. have We of of that portfolio us

for hospitality retail, and any requests and today, than are we have multifamily. we our service seen have higher industrial various As office, slide, loans credit from retail on portfolio zero. risk X originated this dramatically in on or But loan office, hospitality

multifamily, credit continues and portfolio risk only exceedingly is Our to on well. that perform

QX. to in added servicing due As $X incorporate loan any credit Steve reserve were reserves impacts that to in in took COVID growth loss our our to quality added million reserves QX in in in will definition expected portfolio. and portfolio of at-risk this large and the the a or The we additional entirely not quarter specific reserve another discuss, to due

received the turning showing to extremely While it would I we good the like economic are days in feel over crisis, reputation focus early call itself at we forbearance small credit before Dunlop Walker the long-standing given There again. requests COVID-induced & to QX, topics outstanding two other about still Steve. in is extremely for once on number have discipline of the

we when our on customers consistent helped I showing Dunlop & pandemic and started communicate First, that decided time everyone what maintain daily that from has a video corporate defines employees Walker when know The going everyone we direct the company. with & home. working hit, helped all team on of needed videos to and was a culture also basis. the outside exceptional to was employees Dunlop and the Walker on inside the during

producing the also Walker estate impact all conditions market discuss pandemic, launched We and webcast, to commercial webcast the We Walker discuss competitors while not webinars real COVID W&D’s were only the rates. to intelligence. care, emotional leaders designed so Walker do but ever itself in these and since. remote also continued differentiated And has macroeconomics topics health by webcast bringing to leadership, the like working, topics, world and of on

And participated replay channel views. have an other the Dunlop. webcast. even marketing for webcast Dunlop’s we participants, on exciting how entirely webcast, just I Walker on pre-registered under a than is Walker an people is more YouTube the impressive a views webcast to what has a over few webcasts XXX,XXX the Today, most & While had have live strategy consistently consistently hundred Walker & XXX,XXX watch X,XXX webcast leaders industry the added received X,XXX for cornerstone more Walker while recorded incredibly is has digital become have view number, with and new or

database example, with pandemic, over our XXX,XXX it’s prior client the people e-mail to For e-mail today addresses. COVID XX,XXX

to mentioned has market and given press the exploded. And forward. outreach expand success a has target Dunlop share webcast, going an XXX will XX%. media we brand & of gained QX. coincidence no It is in strategies QX, articles Our our publications in in enormous by Having Walker marketing continue during digital over all-time record the W&D Walker that

Member, justice time time total is for mortgage diversity, gender Wednesday joined The Board has topic top increase of so. already Walker and and diversity detailed leader goals action. diversity earning Walker both On management is Dunlop’s I industries Dunlop racial a by in to in & second it racial webcast, Rice, established said, to The is and of the brutally and ambitious continue to John and Walker regard consistently Walker murdered commercial in XXXX. estate webcast, do and the been with positions we the the on real over, after & positions real acts racial Dunlop George Floyd will diversity. that for me streets was Minneapolis, &

We and Destined Project have Leaders. programs to and Europe invest capital important been Housing And of will time these Tomorrow, a Future major continue Leadership Management sponsor our have impact. to for we greater make

building commitment we at tying and have environmental, to driven in of by program, And Employee inclusion compensation. governance the our Resource have center a in robust reinforced of our executive and diversity and these to long-term We our are the and large diversity Minority Initiative. process our Women’s goals, put goals Group social and part accomplishment of the inclusion

industry, communities promote commercial an over importantly, over portfolio most systemic live. country weeks all concept back I to to on into to during see of challenging and through coming X As ensure provide in wrote do across real change more communities I communities the I’ll coming shop detail, quarters. the to our industry work, and in clients then these the results the equality actually to to ago, talk community, community Steve Steve? and financial ahead Dunlop’s to insight must, to can the turn some We estate we premised & times. And what as will now years, is all we and credit Walker to come second happens. quarter our call

Steve Theobald

Thank and you, good everyone. Willy morning

workforce. operating demonstrated line transaction fully significant a to the balance of total year-over-year results with model Mae our of loan QX continued year-over-year we quarter business while million. remote the originations, record strengthen delivered our in second the and Our once power $XXX Fannie our which billion, top again and in of XX% total sheet, to $X.X a included exceptional increase bottom drove growth volume increase revenues quarterly as

earnings were ‘XX. million per net QX diluted up of XX% $X.XX, both Second income quarter and of $XX from share

billion total originations. of debt volume by billion $X.X financing Second quarter led $X.X Mae Fannie was of

to comprised consecutive debt forecast to our over points. of with Fannie quarter, margin which, pushed robust originations basis well on financing points, XXX Mae second gain range our the basis along For XXX XX% HUD above originations, volume, XXX sale of

year Fannie market been Mae. The with our characterized half first the of by share dominant has

we Looking expect at in an current our pipeline business, originations particularly in second of to the QX. see Mac Freddie GSE half, our increase in

debt originated quarter be Freddie current for the constrained poised a Anticipating by environment. in a HUD the the in breakout the sale having economic strong while for continue points quarter. on XXX the the with in to gain originations we million brokerage of Our in Mac likely year business the for more to range is to expect shift QX, rest basis be volumes XXXX, margin $XXX and will XXX pipeline to of year,

commissions expense top of operating a variable revenue financial was as XX% And total compensation performance of the and strong year-to-date quarter. $X.X as Variable to employees. has hiring expenses increased growth revenue quarter. new our scaled due metrics, the of end and to XX% Personnel of Our healthy XX% expense above continues bonus, driven target business an key outpaced of by of respectively. and employee for quarter was XX% model second on increase our with per margin during finally, the return over costs equity personnel in produce to XX%, both of million ranges the well XX%, the revenue has percentage during

the the the just financing our grow year portfolio portfolio our billion market. Our have first $XX last months, more enabled than $X.X in service strong the debt million X in quarter $XXX by half servicing to volumes at the billion ended below of us and

goals. servicing million Vision have billion, important an crossed QX. strong pillar since fuel to As achieving our $XX successfully with portfolio continues totaling XXXX over revenues of cash fees Willy we record The $XXX mentioned, in

more Additionally, the of in than QX rights higher servicing of in were ‘XX, record those revenues the translate million will mortgage future. $XX the servicing into double quarter, which cash fees

Turning now liquidity. to

cash $XX.X increase and sheet, flows $XXX cash loan the million balance of by strong The end the to interim million, We by to driven was on in our in in the continued EBITDA available interest increasing our was cash million of million QX at rates strengthen operating the from quarter $XXX in hand driven payouts end continue at portfolio. low quarter. primarily the ago earnings, our short-term was million from year decline $XX the impact escrow year-over-year. by which on down $XX.X The of Adjusted declined June.

Our drive EBITDA interest will earnings the average to upside escrow at of adjusted and were which $X.X billion, June balances start rates to if end rise. significant

principal last the an on Mae interest line During rate million mentioned portfolio. the repay finalized fund are the in structured date, is Fannie XXX payments and To had into few supplement of advanced provides of line our existing payment portfolio. the collateralized a LIBOR by interest forbearance $XXX plus principal to used for have at be agency very requests we in advance interest servicing commitment advances the loans less new the are delinquent is warehouse may took and advance call Fannie only granted advances. we’ve forbearance. Fannie Mae to on end quarter, advance Through million of XX% Mae’s or to The DUS which within had XX our and our than July, is totaling loans of requests principal points we no we basis the facilitate May. in that line and since portfolio, X Mae of our Fannie facility Fannie also payments that to and $XXX Mae and The forbearance,

forbearance periods X first took the made really sign come all period their good end. a July, to in initial an month April, in the addition, forbearance that post payments forbearance In as X loans

talking to to spend the I want turn about I credit. call time back Willy, some Before

increase additional all and at-risk by perform be we Unemployment our continued seems in future to remains forecast at has for to to with in well was government portfolio that requested the for provision expense additional allowance levels required request credit loss quarter, driven the the our by $X economy post The obligations million our and stimulus quarter, losses. to first in very to de of those forecast expense Fannie in took during will an in any the change demonstrated related Mae payment established the portfolio growth not forbearance July. provision the by date related our quarter Since April was are portfolio. and we burdened our forbearance the During who COVID-XX. as rates it number forbearance minimis expected, while the provided, likely we making our

Our loan allowance basis of but our we the to now portfolio, respect due expect our at fully overall year, from in allowance $XX portfolio, by size the interim March XX be We to into the baked portfolio. our points the which stands in decrease the that at million during end reduced that to will With forecast. June. of over the XX million of at-risk $XXX $XXX just million declined $XXX,XXX the quarter there is over or next our defaults portfolio at

for in portfolio this of for million, loan at we’ve profile lock refinanced have XX%. off in year, of third-party rate and Inclusive exactly Blackstone or reduced achieving we’ve over by always either XX far program. them loans year, the Fannie lock those off, interim So $XXX totaling this financing, the the risk lending JV, the reducing capital, objective and XX significantly Freddie, so rate paid the far permanent million mostly of the to loans interim $XXX had XX we pay with had we loans

sponsors. the market high-quality uncertainty lending XXXX. the to entire see growth massive date, Last our really through about share at originate time, quarter, performance the we and of interim very QX, of expect first, restart We strong good we faced given double-digit opportunities our portfolio performance for light the the in from the backed this crisis. earnings off consciously in multifamily goal per in Overall, we the our of in loans our of we feel best at to market to

business on Our XXXX we the half operating double-digit to margin track and to we and on for have to now pipeline achieving of of is XX% put goals results annual XX% see the the for QX XX%, return us achievable. our EPS for respectively, and back growth strong XX% believe first equity financial of and year

Board the of an capital robust a our the and position of addition, record payable confidence as share on due continued $X.XX We for this half as August in XXXX being In after quarter shareholders Willy. and This to our to for to turn a team, for dividend approved XX. over shareholders continues and clients, after had us Thank economic is model, amazing call great for of back liquidity year. I give all environment. each per us which and dividend an face quarter will of your uncertain business to exceptional the deliver maintaining other with first morning you resilient quarter year now the support.

Willy Walker

Steve. you, Thank

in quarter. to set team, pandemic processes, a have many, we the and distributed opening the the and contributed to skipping my been provided pandemic, As barriers performance culture, high work has remarks we growth And when Prior & a fantastic year-to-date the years, beat. Steve strategic exceptional. Dunlop’s financial model over to focus new implemented transitioned show, and just our thanks to the without many systems in, details Walker COVID first

mortgage over debt out customers and a in And environment to to upon activity The properties, the conduct refinancing executive We our our manage COVID collaboration. pandemic for how spreads I weekly calls continue that Dunlop client multifamily as the W&D of tight transition our seamless well remote providing everyday. have previously, to exceptional has as and inspect close our to mentioned hit commercial of themselves, sector. Zoom expected is loans sales and team appraisals, interest on terrific low Salesforce been receive to working, And before created outreach investor service market using rates figure the this comprising agency-backed own of refinancing be commercial of so employees and long volumes expanded largest the in Walker share. total the took multifamily each Box to estate commercial And the to capital in our our volumes loans years. portfolio, real positioned XX% as multifamily environment with should out far property should close has which asset business of capital dramatically A And continued the such hospitality rebounds, are strong financing our to so markets as as one year, been industry multifamily real office, our and business pandemic core stabilize. of financing new estate drive coming we non-multi-family well coming macroeconomic the extremely classes, business. sales on and has as & providers retail XXX to

not As a Vision not – stated through management XXXX I our which on at trailing the XX-month asset going end I like we end is as did goal billion the of AUM. during at of the business, discuss ran to underscore. achieve noteworthy of several XXXX that quarter the accomplishments as started There we $X however, basis, of are, would vision I XXXX to

types a broad Mortgage property of invested on in joint First, capital capital separate components: comprises of billion insurance multifamily behalf lend JCR originate Blackstone with Capital, array X life commercial and venture accounts, Trust. bridge through AUM equity our we our loans by we into of companies $X.X debt

we trust Mae financing fund million of $XXX to a provide agreement capital QX, mortgage Mac. on Canadian deals originating Fannie multifamily with are where pension an first During equity up to or large Freddie with preferred reached we

We JCR Partners & Dunlop also forward. Capital Investment the and Walker rebranded business to reorganized going

to Fund, fund. opportunity our efforts began Sixth raise the an quarter, during we Finally,

rapidly will made are had So grown the the are quarter extremely sale while future business we Vision business in loans originating with during play XXX has them outlined, underscore, his outlook carry as made basis new and not pleased I about originating are as quarters. The today to the gain would like QX. XXXX we our forward. in a margin as it’s and progress point currently think going Steve management our point demonstrated how by we during we fees, asset comments out servicing that on with it we significant

numbers, X, a in the rights convert amount convert even XX income we huge revenues EBITDA life servicing our over see As revenues generating the of the non-cash depending you years, can revenue tomorrow. and so and into today in of non-cash are cash that loan, on XX net cash to next mortgage will

begin expect at and volumes will in also going forward significantly income add origination our $X.X will cash QX in some cash brokerage substantial to interest we in debt will generate of We to our next point, be rise and higher and interest the finally, escrow year, fees. property billion which And rates deposits.

the our up of have an quarter So the have measure, we in any of while the truly cash we successful went & QX our grow Walker market Dunlop the a through were is the through as Walker by to it working to clients’ to and built. immediately using total future XXXX, insights real just Angeles and public momentum data our having had differentiated a quarter team analytics, both for as times about very us Freddie debt company’s loans in on Nashville, was we and able XX% QX balance several Zoom and the increasing ability the and again We history estate gives real think which our time debt became team the platform small add York team, exciting holding in first generation dramatic United best. Los of have brand for of small industry. our our a were with business. moments and team emerge gained estate past webcast, in New economy crisis. of has all share That IPO decade. Dunlop Mac XXXX the States and growth where in a emerging the we quarter is proprietary originate brand the that from acquire great commercial team the competition. collaboratively and borrowers equity to to set HUD from into Walker bring Dallas. property placement seminal our to during long we just Freddie us the financial half sales commercial lender, help for for used uncertainty, the market the this scale, dramatically originators talent to cycles the in weather can us financing our and have of in generated very small exceedingly We proven as another By Fannie company, culture over XXXX. in of hired work Mae one quarter And industry balance Mac. we built and our the best grow the And want during area top & loan we

& model Dunlop, are colleagues focused marketing of blessed we truly truly in company during if and transitioned challenges the growth. is Dunlop strategies, future the the any an and an winner. we months continue but the you Walker company dramatically. generated today. and years is has drive have Finally, QX that coming initiatives in for XX but ahead. to other been venture, demonstrated And market joined seamlessly, our of have us continue Thank my we so operator our We ancillary we I to work will at Walker challenge, indicator, company, seen the a we our all have doing good never I & heavily in I over face and at outstanding are strong on in Even distressed have invest to emerge and team how record for years, benefits, a for forbearance revenues invest continuing appraisal operating performance fundamentally since not QX. future Apprise digital very Walker financial I quarter the challenges transformed for the as strongest of in of market incredible webcast growth in turn remain congratulate its know low culture. have our I to years. but want our plenty position the and questions. company’s I to only and while working corporate remotely time the and day and a and through credit the all plenty number presence with and call income had to growth requests, my initiatives. now times our defaults joining history, exciting stability outstanding no are that of to the the will W&D thank its up of the will but again, us and brand And in shown There in strategy have allowed we in platform long-term technology period joint people proud market stress, the to of and

Operator

coming Instructions] first Our is from Coffey Wedbush. question of Henry [Operator

Henry Coffey

morning. Good I hope me. can hear you Yes.

Willy Walker

Henry. Good morning. Hi,

Henry Coffey

in – So topics, numbers multifamily likely are multifamily terms What and usually as one are credit the the they of estimate? which, of obvious forward are Multifamily where out quality open there. supplemental thinking delinquencies, unemployment what’s question rates we right sort And is high, a of about lot on then of now, have delinquencies the look actually you of open but student levels in is, are. payments unemployment about the you course, housing?

Willy Walker

also well QX, concerned the as in QX took but the of we asset sort at Steve Good there extremely sit if any $X you to Henry, data data provision given Look, reserve million we do you are the zero likely not in as defaults due about. growth one tells morning, was same new CECL that took which asset to Steve and any us. are the you mean joining we right Thanks provision about, right zero. said, now in provisioned loan to worry But got we the for okay, will look – likely standard. to into Henry. there the $XX at But a XXX% specific portfolio. now, are we that portfolio say, come got for there outlined, and time, the I the or are the million

So through in feel extremely portfolio losses de with We our smaller a much then. good. back crisis minimis look, We had the portfolio. great we financial went

XX morning, has to you type that all benefits, Squat this rent to are the to senators that should of Box House listen that And of White mind, accumulated of have the level will last years. members they stepped-up from yesterday, we you about of conservative payments. very some get unemployment Republican strong. you there equity $XXX said he support plenty go any talk likely And that and extension of been unemployment stepped say break of amount his to the on McConnell the more I caucus, of up if in the going that $XXX are benefits. saying we a see to Speaker And the is you want huge or then of hold you over heard in If extension loans also capital keep would assets have a roll unemployment

agencies I And Walker of a in this on around capital during those us de loan had amount default the higher equity so the assets, back the crisis, than while owners much rent bar you throw with crisis. as great know, rolls Dunlop great may losses. loans And financial degrade somewhat, would the the multifamily, and the during and think minimis & financial time is concept keys their that

student housing, your and me been What about virtual else. on school many off-campus on-campus quarantine housing know, housing, Universities de-densified, extremely doubles the you Let to we have into you singles. anything housing live, their to is have turned then second student have question follow-up doubles, billion you as or at-risk areas. some allow have and taken into that have across if properties United $X.X loans housing. Henry, to States. it the has see is headed that they will. of going student go just transforming On And housing quickly also you triples back hybrid students, They into to made back on-campus if whether good

approved acquiring that those Walker will student you that for operators LTV, largest spiked. XX% have Dunlop, for they are this And & housing demand I of result is who are other a that million our strong. off-campus As the now numbers seen which fall. pre-leased give have yesterday, $XXX extremely that XX% housing point, And pre-leasing has we, one housing good off-campus is right borrowers one loan a student data housing on upcoming just a at property of that,

really are is, into there that b, investors there not and right preleasing away space stepping from space. many the a, good; who now, are and that looks So

Henry Coffey

risk I real we multifamily a of have what’s though the market? whether of going picture issue, amount on we see will at is will on and with comment. on see on lot just the certain thoughts you then proposal the And to. was fall, Do big really mean now you react a capital even I least essentially thoughts change we has the FHFA a irony last to any the losses. were And where the floating there on recapitalization? helpful. Whether GSEs? have out a there note That’s that put multifamily for twice area with up weighting don’t single, a that did guidelines capital

Willy Walker

and I think of as would lot Washington that, you in of Fannie of dependent heavily the forth outcome the issue Henry, is put And know, privatization a, election. the the right there’s on with a Freddie, I activity plan [indiscernible]. now November FHFA

standards, relates the to read the imagine, it have capital through As can we specifically you proposals. as

comment then worked on, And have Walker there that second at as I concerned privatizing Fannie industry the the being We Freddie. will in say Director, Mark are that is from outcome say if are position, commenting Calabria point. are I and & would proposed and of just have with Trump we the FHFA And stay capital reelected, FHFA things nothing the think on about overly President that there’s but those proposals. on just associations to Dunlop’s in that administration continue to will we standards the depending to election, of would I think I thing push the this you

clearly from is President new newly FHFA efforts former likely elected be Vice If President Dunlop’s in federal that it’s continue have government, strategy the on perspective, are are a going there that multifamily lose. there If heads as of of & are get will and continue And now and Biden become as sense And benefits outside parts scale. tails a you likely their you I be they They Henry, we pay they continue for in will, director managers to agencies. increasingly new solved win largest said sort multiple by if capital market-pay to to times, to to Walker be they their the of can they the the one Biden can going be we more, Vice government. and innovative. they President, federal that Biden elected, elected are will if provide there of senior that that partners. put a think that those is I will privatized, President to

creative and I lead been of would and market. within the both trying wildly create conservatorship, to say, products in confines to Fannie Freddie, multifamily Although they’ve the new financing

Henry Coffey

period. tough solid Super. Listen and congratulations on a a quarter pretty and

So, thank you.

Willy Walker

Henry? that understatement, is an – that’s Solid,

Henry Coffey

very Very, solid.

Willy Walker

Appreciate it.

Steve Theobald

Henry. Thanks,

Henry Coffey

solid. special Extra

Operator

come next of JMP. Our question will Delaney from Steve

Willy Walker

might yet, on you hear mute. you be can’t we Steve,

Steve Delaney

Can now? me you hear

Willy Walker

Yes, we can.

Steve Delaney

I that made just mean not say own it to just WD. you cases, your new your can an book, congrats about how quarter, loans clients that new clear that? put Willy, I’ll on excellent but loans, in – they’re are new very the aside. we new some – churning

seeing they when a Freddie you. them so rates. from? kind you if loans you’re question are their range go benefit borrowers drop rate being my Can are coming quantify had with of And or of loan realizing the obviously that XX-year in fixed putting What new and you rate is institutions with are So these benefit Fannie? of could, huge loan is, a into Thank that where these the out current their types the loans we’ve off? of paid

Willy Walker

Sure, Steve.

joining for thanks us all, morning. of this First

is it basis points over typically the on we to new as relates are First the XXX rates. is well seeing pickup what

are X We new on etcetera. right X sponsorship, levels, leverage now and between XX asset, depending debt at out etcetera,

XXs. below and loans and into XXs dipping the Some getting are X X XX X

but Some handle us loans are previous it. redoing the and speaking, on the most it just that’s coupon, refinancing four of had around the that generally now X right we’re range paper a

you at pre-COVID on the discount actually than the sale on sit rate from XXX say, pricing And be coupon significant there more of pre-COVID an one would the of off at higher end I X%. quarter. we very the between of news they also only that of as end of a price say, end a QX. as the sale transacted when – far a wouldn’t of that it points there the And difference it a pricing was you was there there’s on closed there And price went the the wow, and is June, financing investment we there. it. was asset their interesting did brokered their we during in at step-up financing the X% at to So a when actually issue deal pre-crisis with basis underwriting and was

a & quite the people then call, you I by, put webcast brought was and so what’s personally basically on I breadth explosion the that bore have that loan And a $X.X And – to discount on firms. inquiry All with up one-to-one because essentially To their bid is X% our was of large billion it, capital take But Walker won be big who’s against on every the of one-to-one in won’t in week. portfolio your webcast to who every cost and says, going our it well, e-mail just through on we that of return new might were direct have & X about the now Well, a client. that $XXX sale the new competitors. that they much at other $XX interfaced we level. so so to Walker them lines transformed it there’s and and one to price with it I with it’s the touching. Depot they that and direct deal. to say, of number the we We listen in which loans that’s the that can the from competitor one share. whole this borrowing billion servicing support brokers that the past there the billion. previously clients million we of of competitors, clients And base that is no that our they smaller front a only relationship one There’s about oh, we’ve question servicing the in that honestly, as $X.X what our almost at has million one saying, of afford of There’s transformed same won relates that picked Dunlop. a time, platform, buying our bankers brand, marketing rights we And biggest them look, insightful. follow-up mind It but has been it we new We to Walker other marketing. off they or question no market we be webcast $XX our billion got loans – the someone have unbelievable to portfolio into $X.X southern brand was $X.X from immediately, with Henry, million, the weren’t management and won that reach one-off in given of expanding them. net you $X.X on new that one other an has all financing that is new the deals portfolio, borrowers of singles the someone of is bankers on quarter, $X.X which in of the there. billion of get client the the loans, other of the what single is $XX I’d and incremental billion added loans. the out put million to that doubles. what and in and $XX was keep million exciting being deal,

Steve Delaney

your that HUD remind my you what You in range you on grow to? would of business new know it’s a the to on a Mae a sale leadership you but Ginnie the in sense us, assuming of percentage specifically new that what Could final. loans? contributor. – total margin big forward, of are That’s embedded HUD what and the mentioned highest new give margin, Steve’s HUD obviously you program us gain going in And loans, was of kind have, volume I expect

Willy Walker

Right.

period an in say I’m mentioned effort you to not accomplishment much but amount and Dunlop, Chief of Production a And technologically I’ll to lengthy for exactly business in who business. and world, when poke to of of look HUD I’d all, not our lender most on is the forward process QX, team. Wiggins, I of QX Herculean am down done in tell that on shut first Steve, are business government also savvy incredible is they the this, who one Sheri time, trying federal amazing and the for at going a So new is just – our HUD, Stephanie to I that Officer, a an process giving our has able demure to thing. job you

First carry of and all, that QX. our QX pipeline into fantastic, will is

said QX time, feel HUD as business pipeline So very been today, at also relates the on I we’re to in team And working becomes something our It’s a time. for working I of got for HUD about it in very QX. comments, whatever say where go good come it long deal, redo time volumes. we’ve up on that as and that a QX a same full, my got because a frame, it the and extremely will has commitment expect you’re reason something, to the to the you you a difficult and volumes be behold, business project has I lo deal, to what is, and

of that the work can’t during the to are visibility to or very we quarter. But get you that, And going about QX there, redo so clearly see what I’d I in did to on We our book. we like of [indiscernible] quite feel QX. we now, I good have right honestly, amount would only QX pipeline love tell us something the a with not now doing in that. do say HUD just

Steve Delaney

volumes, point? understand, at that is what a HUD come? of if basis opportunity sort gain XXX, you those can which HUD, on to quantify which to XXX when and Yes. Well, the would third contribute you of expect When from at apart to rough your I looking on quarter loans sale the you’re margin range on loans

Willy Walker

various want to color Do of broken in I ranges business you whether that Steve, refinancings but that, lot do account are of on the of EXs, to doing you – sorry, depends lot or and out doing, are give gain want we’re we that? A how that? on construction lines we on a which loans whether for XXX, which margin. we’re color on Steve, Henry mean, haven’t on sale some some

Steve Theobald

it, And margin we was do of number it... also sale is that a much So well, in QX, to which Steve, debt on right? brokerage function as of a Yes. too, how helped gain of the volume elevate part suppressed look,

Steve Delaney

Yes. Understood.

Steve Theobald

On that level.

XX% volume we’ve if the hard debt brokerage get factored stick I’d was predict pick-up HUD at level in overall around Willy’s QX. about estimate that. it that’s good, going it’s the to that So pipeline in certainly into But The and love a of to looks and in point, see given. to forward. QX

Steve Delaney

Got progress on it. Well thank and comments you most of the made again, congratulations you’ve in the XXXX.

Willy Walker

Steve. Thanks,

Operator

from Rahmani Our next question come KBW. will of Jade

Jade Rahmani

you can Hi, me? hear

Willy Walker

Jade. Yes,

Jade Rahmani

much. very thanks Okay,

out find is the there for to quarter and specifically, originations the wanted occurred? were that any Mae on for third And quarter? Mac, outsized the pipeline looking that Freddie in Fannie Just second how

Willy Walker

Yes.

Jade So joining good us. thanks for morning, and

our is said in strong. pipeline remarks, in Fannie extremely QX I As and for my Freddie

We QX, visibility on it have great and Freddie and business our in Fannie great. looks

– question Henry’s the responding the in so QX big the that The one Management $X.X Xs, deal. Southern We of origination Steve’s if of you as Xs the Southern As management to numbers. Management in on in things of in not portfolio, I it mind deal $X.X in on QX actually, billion on recognized relates the it is keep the as to QX, mentioned deal billion in our much all were the originations to QX and was the net or servicing to mentioned. southern question will, addition I those – was

was there. and significantly there was count no There portfolio so no big And up. in in loan there was the loan

but that’s I come come a fees Because And large servicing honestly, also where quite margin. fees lot when origination transactions, we only do new so down, get you clients, down. structured mean, we get of not

And full And typically fees. servicing getting was transactions, performance. QX a full that of in driver doing so one-off origination those economic fees you’re and when big we’re our

Jade Rahmani

Okay.

business. the I that I And terms basically that to is double-digit driven was non-Fannie XXX make In provided still year? margin third to by EBITDA you which mix any of increased gain add was secondly, Mae points, the EPS with quarter for there you XXXX just wanted that could comments the basis I on adjusted sure respect financial believe the of the business in outlook, growth XXX guidance sale of expect to and is brokered got

Willy Walker

Steve, you take do that? want

Jade Rahmani

that expect or? grow to you Do

Steve Theobald

as that adjusted the Yes. Look, decline the environment escrow to the quarter-over-quarter low my of has I think, in primary comments, Jade, alluded interest drivers in I and was EBITDA on that, impact one our the of rate earnings.

that very are, run, bullish obviously, for we see us. impetus don’t long up going any think I the in that rates asset about on short I that. back term, But

level going to to we’re that’s where at couple continue we’ve think the And see equal, all to year-over-year of things on muted than interest on escrow over we I So the years, EBITDA. going more what last pressure seen earnings a rates just comps put are.

I our services generating. operating feel at mentioned. continues to the think the at a the more servicing as the still for well Willy portfolio in portfolio bode that’s generation flows business really we’re to the end the cash good cash and as of higher day, put into rates, future, the about of and cash the as grow we And we going business that generation

Jade Rahmani

both they for space. strong portfolio. the environments denser in from – from in an clearly, single-family noting in sectors are the At time, regarding very, picture move-outs forbearance are servicing strong seems in it the Bigger by both and single-family low very housing question evidenced results rental performance, have same uptick homebuilders and multifamily. WD multifamily collections and Tracking outlook strong levels Okay. into that as the REITs, multifamily been

multifamily and you tensions an would an and the the it in housing in how increase for outlook square So demand? increase suburbanization credit two potential to relates those as for single-family

Willy Walker

as before. I’m discussed great migration behind are economic this as not there’s this is And of suburban reality we’ve you Jade, this. underway. Yes. that all sit an convinced that

Sachs of downtown Connecticut, that likely you and that a to living tomorrow related that. But move doing and you you to you your not core stop from the in out Goldman do want business. have an and you’re could apartment Greenwich, done you year that’s ago, our at If Manhattan associate can are renting decide

And We’re loan not York – we’re on is the don’t New market. thing focused and with. that related first of a the have we second asset downtown a on all, to middle in start

We’re focused on workforce housing.

into in until X housing. Jay, running is stock single-family can’t the a single-family pandemic on, SFR over is of Yes. supply out as I’d on Is affordable United Yes. single-family XX and going affordable there’s on home? was to buy today. there because there that focused unemployed X what the Occupancy with Diana multifamily. previously, single-family who have buy And renters there couldn’t If that’s that it full. they XXX a out other to to SFR, building there there’s today. levels reality economic years in for go they for said marginal and last housing. say, like that We’re talking CNBC people know, great I’ve have move today people entry-level, you, this we exactly States But of held has opportunity entry-level home a Olick million of Is supply is a continue morning want And the rental? housing, be about happened. to people years, is the single-family people that you for fact new a that no also will the go live I don’t up.

price dollars billions to are out when there the to between to there or point they’re multi over. staying SFR. being SFR, yes, in be is single-family now moving So not of a they’re going competitive and And put to for have build out then pandemic going hopefully but homes of there

homebuilders majority the if But move it people times. be to and an available, can home, American. to we look, of at who plenty the it are a increasingly cost in location, to of are making with product there which they end people unaffordable it. out the their a which afford single-family suburban the So who would housing is just day, the to make afford pushing from uncharted homebuyers new is that are entry-level having that urban the first-time up, location of There built can’t feet of voting entry-level average

Jade Rahmani

trends, highly I And And I in a become will it’s uncertain tell terms to at Okay, too change behaviorally market. this think long-term of the it’s what think Yes. these in early point.

last? much And refi to strength, do this terms you the volume activity? was In of how current it wave refi of expect how long

Willy Walker

in as of $X.X where made it. we call made with we that of also it in and investment And have a sales got million And XX-XX the to in as the relates have deal $X.X We activity. $XXX QX, end I you billion we you at quarter already sold our But told refi or acquisition versus closing I in reference brokered it numbers, saw of acquisition. QX. we a for financed to pipeline the we also billion QX also of

at more more the we’ve are platform Dunlop. the we the and the & showing investment that both where team property, and property of seeing got and power We’re deals, the financing Walker sales listing

on So back, as you’ve the extremely pipeline can an Fannie go Freddie overall as got see basis, acquisition said, as for refinancing outlook comes we just sales a pure for QX. But also it I volume healthy the investment and of up. financing relates to

Jade Rahmani

Congratulations the a taking for much. And great on quarter. thanks very questions. Thanks

Willy Walker

Jade. Thanks,

Steve Theobald

Thanks, Jade.

Operator

so questions, the turn Willy are There closing floor back remarks. I now for over you. no will Thank to further

Willy Walker

I’d times morning It my transformed this I team got of QX. joined truly for we the call. a our to a everyone, reiterate who ahead outstanding has reiterate and W&D to exciting for us. the congratulations my of lot And also us thanks company,

thank and day. a So today have for great everyone, us you, joining

Walker & Dunlop (WD) 10 Aug 202020 Q2 Earnings call transcript