Q1 2024 Walker & Dunlop Inc Earnings Call

Participants

William Walker; Chairman of the Board of Directors, Chief Executive Officer; Walker & Dunlop Inc

Gregory Florkowski; Chief Financial Officer, Executive Vice President; Walker & Dunlop Inc

Jade Rahmani; Analyst; Keefe, Bruyette & Woods North America

Steven DeLaney; Analyst; JMP Securities

Brian Violino; Analyst; Wedbush Securities Inc.

Presentation

Operator

Good day and welcome to the Q1 2024 Walker & Dunlop earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to [Jenna]. Please go ahead.

Thank you, Rose. Good morning, everyone. Thank you for joining Walker & Dunlop's first-quarter 2024 earnings call. I have with me this morning, our Chairman and CEO, Willy Walker; and our CFO, Greg Florkowski. This call is being webcast live on our website and a recording will be available later today. Both our earnings press release and website provide details on accessing the archived webcast.
This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. The site serve as a reference point for some of what Willy and Greg will touch on during the call.
Please also note that we will reference the non-GAAP financial metrics adjusted EBITDA and adjusted core EPS. During the course of this call, please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics and investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements describe our current expectations and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC.
I will now turn the call over to Willy.

William Walker

Thank you, Jenna, and good morning, everyone. As we outlined in our February earnings call, the strong January jobs report pushback expectations for March rate cuts and the 10-year treasury rose from 3.88% at year end to a high of 4.34% during the first quarter. Market uncertainty and rising rates disrupted the transaction market. And according to RCA, first-quarter 2024 multifamily property sales volume was the lowest level since Q2 of 2020 when the pandemic shut down the market.
Within this context, the W&D team close to $6.4 billion of total transaction volume, down only 5% from Q1 of last year, given slightly lower volumes and no onetime benefits that we earned in Q1 last year, which we pointed out on our last earnings call.
Q1 diluted earnings per share were $0.35, down 56% year over year. Adjusted core EPS, which strips out non-cash mortgage servicing rights, revenues, and expenses with $1.19, up 2% from last year. And adjusted EBITDA, which has been an important indicator of W&D's growth and financial stability was $74 million, up 9% from Q1 of last year.
The origination and servicing businesses we have built with dramatic earnings growth and expansion cycles and steady earnings and cash flow in down cycles is what allows W&D to maintain our market presence and invest for the future in challenging markets, $6.4 billion of transaction volume was driven by strong debt brokerage volume of $3.3 billion, up 40% year over year.
Our clients need capital and our debt brokerage team did a fantastic job finding the appropriate capital for their needs. Importantly and a typically over half of our Q1 debt brokerage deal flow was on non-multifamily assets in retail, hospitality, industrial and office. The vast majority of 2024 commercial real estate loan maturities for our non-multifamily assets and they start to the year by our debt brokerage team using non-agency capital is encouraging. But as you can see on slide 7, the Mortgage Bankers Association estimates that $929 billion of commercial real estate mortgages maturing in 2024. Of that, rather large volume only 28% or $257 billion multi-family loans and only 3% or $28 billion are Fannie, Freddie and HUD loans.
In a normalized market, half the market would be multi-family loans and half of that volume would be with the GSEs and HUD. This lack of multifamily and agency maturities is good from a maturity risk standpoint. It will require our team to search outside the W&D portfolio for financing opportunities. Something our team has done consistently as WND. has climbed the lead tables and built $132 billion servicing portfolio in the first quarter alone, 79% of our refinancings were new loans to Walker & Dunlop.
There are two big questions after Q1. First, are banks going to require loan payoffs? Are they going to allow borrowers to extend banks call loans that will be over $400 billion of maturities that need to be refinanced our bank balance sheets in 2024 with bank simply extend loans because they are performing and the bank is making. So for plus 300, for example, there will be no 2024 refinancing of that loan.
Second are Fannie and Freddie going to step into the market and refinance multi loans that are part of CMBS pools, debt funds, CLOs, life insurance company portfolios or bank balance sheets. They have done this in the past and are doing this today. But as we stated on our last earnings call, Fannie and Freddie have said that they expect to do the same volume in 2024 as they did in 2023, which given the volume of 2024 maturities surprises us, there are opportunities for the GSEs to exceed their 2023 volumes, but it will require them to be innovative and entrepreneurial.
And in partnership with their desk and off, they go partners, for example, a multifamily construction loan on a new asset in Austin, Texas might be priced at, so for plus 300 with a three one one structure three-year loan with two one-year extension options. If the asset is still leasing up and doesn't have 90% occupancy. I can't qualify for GSE loans, but if Fannie and Freddie modified their occupancy requirements for assets owned by established developers with impeccable track record, they can put permanent financing on the asset that would do several things, reduce the borrowing costs, allow the owner to lock in long-term fixed rate financing. It also de-risks the bank's balance sheet.
We continue to invest in technology and are seeing promising signs of growth in small balance lending appraisals or multifamily appraisal business. Apprise grew Q on appraisal revenue by 20%, while the overall multifamily appraisal market shrunk by 53%. Our investments in technology have generated significant efficiencies in this business, and we achieved our Q1 growth was 23% fewer people. Our small balance lending business has maintained market share with Fannie and Freddie grew Q1 revenues 17% year over year with the opportunity to grow dramatically as banks continue to pull back from originate new small balance multifamily loans.
Our servicing and asset management business contributed meaningfully to the strength in adjusted EBITDA, thanks to dramatically lower, but all from the portfolio and our conservative credit culture, which has led to strong credit fundamentals within the portfolio, we launched a new technology portal for W&D servicing clients at the end of 2023 and already have over 2000 active users. Not only does this bespoke technology save W&D licensing fees, but it puts us closer to our clients with a technology solution We not only own and can upgrade, but also can add new features to engage more deeply with our significant servicing client base Walker & Dunlop, affordable equity, formerly known as Alliance Capital generated $18 million of revenues in Q1, down 9% from the first quarter of last year. Although this is a slow start to the year, we closed affordable Equity Fund one 19 with $163 million in funding in early April, which will add to syndication fee revenue in the second quarter. It is our expectation that W&D affordable equity increases both fundraising and disposition activity in 2024 with substantial growth over the team's very successful 2023.
Finally, credit in our servicing portfolio remained strong and as a result of lower payoffs and continued growth in the portfolio, we grew servicing fees 6% year over year in Q1. This is one of the advantages of having both an origination and servicing platform inside of W&D with limited runoff in the loan portfolio, even reduced loan origination volumes at UPV. and fee income to our servicing business.
I will now turn the call over to Greg to discuss our Q1 financial performance in more detail, and then I'll come back with some thoughts about what we see coming ahead, GREG.

Gregory Florkowski

Thank you, Willy, and good morning, everyone.
Despite the market challenges Willy just outlined, our team delivered for our clients and our business delivered growth in adjusted EBITDA and adjusted core EPS for our shareholders. Diluted EPS was down 56% in Q1. But as a reminder, the first quarter last year included a few atypical items, including an $11 million benefit for credit losses of $4.4 million, premium write-off from the refinancing of acquired debt and a $7.5 million investment banking transaction. These three transactions added about $0.45 of diluted EPS to our financial results last year.
And without those items, diluted EPS this quarter would have grown, reflecting lower compensation and G&A expenses from our cost management efforts over the last year. Lower transaction activity in Q1 brought our operating margin and return on equity down to 6% and 3%, respectively. A core component of our long-term strategy has been sustainable growth of our servicing portfolio to provide the capital to reinvest in the long-term growth of the business and support our quarterly dividend despite lower transaction activity during the tightening cycle. We continue to invest in our capital markets platform because it fuels the sustainable long-term growth of our servicing portfolio.
At the end of this quarter, our servicing portfolio stood at $132 billion, up 6% from the prior year quarter and generated $119 million of servicing and related revenues up 12% compared to the year-ago quarter. When coupled with the largely recurring revenues of our asset management businesses, we are generating significant cash revenues. As a result, adjusted EBITDA was $74 million this quarter, up 9% compared to the same quarter last year, illustrating the strength of our business model.
Turning to segments and starting with capital markets. Total revenues for the segment declined 21% to $82 million, driven by lower investment banking revenues and a 30% decline in noncash MSR revenues from GSE lending. Despite the GSE slow start, there are deals and capital available, which drove our broker debt volumes up 40% compared to the same quarter last year. The decrease in noncash MSR revenues drove a $7.2 million decrease in net income for the segment, while stronger cash revenues on transaction activity delivered in-line adjusted EBITDA at negative $19 million.
Our servicing and asset management segment for Sam continues to perform well, generating stable cash revenues from our growing servicing portfolio and assets under management and revenues increased 6% year over year to $141 million due primarily to growth in servicing fees and related revenues. With little change now expected in short term interest rates this year, placement fee should remain elevated in 2024, which will continue to drive our strong cash revenues and adjusted EBITDA for this segment.
Total revenues from Walker & Dunlop affordable equity, we're down slightly from the same period last year. But As Willy mentioned, we expect a pickup in revenues after closing our latest multi investor fund and a $163 million fund that will add to syndication revenues for the second quarter. Adjusted EBITDA for the segment was $120 million, up 6% year over year, and operating margin was 38% compared to 48% in the first quarter of last year, with the decline in operating margin, driven by the previously mentioned $11 million provision benefit that boosted operating income in the first quarter of last year.
Before I turn to credit, I want to provide an update on the loan repurchases we reported last quarter, we received three loan repurchase requests, one from Fannie and two from trading. In March, we completed the repurchase of the Fannie loan for $13 million. We have begun our loss mitigation efforts to resolve the outstanding issues with the asset that led to the repurchase and we do not anticipate incurring a material loss when the asset is sold following foreclosure, the two Freddie loans totaled $46 million and in March, we entered into an indemnification agreement that shifts the risk of loss from property to us on those two loans in lieu of repurchasing them. One of the loans with Freddie is an $11 million loan that is current and our customers working on a plan to sell a portfolio of assets that includes our assets and we are not expecting to incur a loss on that loan.
Second loan is a $35 million loan that shows evidence of fraud by the borrower. We are working on obtaining reliable financial information for this asset, including an understanding of capital investments required. Based on the preliminary information, we recognized a $2 million loss provision for this loan during the quarter. We will provide updates in the coming quarters, but may incur an additional $1 million to $3 million of expenses to fund operating costs and capital improvements for the asset in the coming quarters.
The prompt resolution of these loans reflects our strong long-standing relationship with the GSEs, and we are not aware of any other potential repurchases from other agents.
Turning to our at-risk portfolio, we ended the quarter with six defaulted loans totaling 11 basis points of the at-risk portfolio compared to three loans at the end of the fourth quarter. One of the additional defaults as a $12 million loan with the same fraudulent borrower that defaulted on the Freddie loan I just discussed. The other two defaults were loans that were 30 plus days delinquent at year end that defaulted during the quarter, leaving us with only five loans 30 plus days delinquent.
These three new defaults had little impact on our overall loan loss reserves, though, because we already adjust forecasted losses upward when establishing our CECL reserves for exactly these types of unknown or unexpected events. As I've shared routinely throughout this tightening cycle, our at-risk portfolio is performing very well, we are actively gathering year-end financial information for our entire portfolio and with most of the data already collected, the weighted average debt service coverage ratio remains over two times with most of the collateral in our portfolio generating more than twice their annual debt service payments, over 90% of our portfolio being fixed rate loans and limited maturities over the next two years. We continue to feel very good about credit.
As I mentioned earlier, our business model generates strong cash flow, and we actually ended Q1 with $217 million of cash on the balance sheet after paying bonuses for an out installments and our quarterly dividend. Given our strong financial position, our Board of Directors approved a quarterly dividend of $0.65 per share yesterday, payable to shareholders of record as of May 16th, consistent with last quarter's dividend. When we spoke to you in February, we struck a cautious tone with respect to the market conditions and our expected Q1 financial results so far, our expectation that the GSEs will lend at similar levels to 2023 has been correct and our pipeline with Fannie and Freddie is growing.
We still believe that the GSEs will not meaningfully surpass their 2023 lending volume this year, one month into the second quarter. Our clients are adopting to clinical higher for longer and adjusting their business plans accordingly, while some deals will need to be adjusted or even reworked, many deals remain on track. And fortunately, our pipeline of closed and signed deal flow for the second quarter is already 35% above the level close for all of Q1, a positive indication that many clients are looking to transact rather than push transactions further and further into the future, provided rates remain stable, we expect the market to adjust and as Willy will discuss momentarily, there are several green shoots across our business that give us confidence we can achieve the goals we laid out for the full year during our last call. In fact, although diluted EPS started slowly this year.
Our adjusted EBITDA and adjusted core EPS are in line with our full year expectations. Through the first quarter. We still have the ability to achieve our 2024 guidance for diluted EPS, adjusted core EPS and adjusted EBITDA with the expectation that activity will pick up as the year progresses and the majority of our earnings will be generated in the second half of the year. We feel very good about the team we have in place our ability to collect data, our clients through these challenging markets and our ability to grow rapidly when the market turns.
Thank you for your time this morning. I will now turn the call back over to Willy.

William Walker

Thanks, Greg. As the financial results that Greg, just ran through show. We have a strong business model that enables us to weather market downturns while continuing to invest in our people, brand and technology to grow market share when the cycle turns. And while it is exceptionally difficult to predict when the cycle will turn, we are seeing promising signs that investors have given up hope for lower rates soon and begun to work higher for longer into their refinancing acquisition and disposition decision making. But 2023 was a wait-and-see year 2024 may end up being the year when the clock ran out on finance refinancings, capital deployment and waiting for rate cuts don't materialize.
As I mentioned previously, over half of our Q1 debt brokerage volume of over $3 billion was non-multifamily reflective of the need for capital across all CRE asset classes. W&D is known for multifamily, but as we have shown, our bankers and brokers expertly provide capital solutions across all CRE asset classes, and we will continue doing so. We had a slow Q1 with the GSEs, but so did everyone the current pipeline of signed applications and rate lock GSE loans for Q2 is already larger than what we rate lock in all of Q1, but that is off of a very low base as the GSEs achieve their affordable lending goals and gain confidence that their loan losses don't become a problem.
It is our expectation that they step into the market more in coming quarters. Our multifamily property sales team issued more broker opinion, excuse me, more broker opinions of value or BOV.s during Q1 24 than in any previous quarter, yet only closed $1.2 billion of transaction volume versus $9.3 billion at the peak of the post pandemic acquisition binge, the quantity of VOBA is being requested, hopefully translates into a more fluid acquisitions market as would-be sellers accept current market conditions and began transacting Blackstone's announcement to acquire AIR communities for $10 billion, felt like the beginning of a new cycle that the subsequent surge in interest rates over the past three weeks seems to have tempered the market's excitement for Blackstone's acquisition is reflective of three current market dynamics. First, there is a ton of equity capital that has been on the sidelines for almost two years and needs to be deployed.
Second, while nobody knows exactly where the bottom of this cycle is, we are close to the bottom or beginning to recover. And third, quote, I'm waiting for rate cuts, unquote is really not a reasonable statement given where the macro economy sits today, furthering the positive signs for equity flows Blackstone's BREIT. had the lowest redemption request in March of the past 23 months, and it was able to meet all redemption requests for the second consecutive month as the largest non-trade re pivots from net seller to net buyer. It will certainly spur transactions that have been absent from the market for the past several quarters at the beginning of the year, we restructured our senior management team, promoting Chris Nicholson, and Dan came to run our capital markets business, Sheri Thompson, to run our affordable lending business and Alison Williams to run our small balance lending all reporting to me, I am both pleased and extremely excited to see how these senior leaders have not only jumped into their new leadership roles, but have driven increased collaboration across W&D.
And it is very evident as I meet with clients that are small company touch and feel combined with our large company capabilities is winning W&D sits in a unique position in the market. Well, we go head to head with the large banks and service companies that have tens, if not hundreds of thousands of employees and then the smaller boutique companies that don't have the recurring revenue streams that we have to continue investing in their people, brand and technology during challenging markets. This market dynamic presents a huge opportunity for W&D to differentiate ourselves and continue gaining market share.
Our long-term growth strategy, the Drive to 25 continues to underpin the way we manage our business through up and down markets. We continue to focus on achieving our ambitious goals, knowing that the strategy is the right one for our business over the long term and will enable us to return to our track record of growth and outperformance. I'd like to thank our team for their continued hard work and for everything they do every day to meet our clients' needs, win against the competition and grow WD's brand in the market.
Thank you for your time this morning. I will now turn the call over to the operator to open the line for any questions.

Question and Answer Session

Operator

(Operator instructions)
Jade Rahmani, KBW.

Jade Rahmani

Thank you very much. When you look at the landscape, do you see any interesting market share gain opportunities? It's clear that the banks are going to pull back in commercial real estate lending and W&D is a specialist in multifamily creator of credit products, interest earning assets. Could it potentially increase its market share in the business? Where do you see the biggest opportunities for that.

William Walker

And good morning, Jade, and thanks for joining us. The first thing is obviously to maintain our leadership position and with the GSEs, given their role in the market and given the mortgage servicing rights that we generate when we originate loans at the GSEs. So after a slow Q1, as I just said, and as Greg just said, our pipeline looks good for Q2 and we're seeing them step into the market more and hydro had a slow start to the year end. And one of those businesses that quite honestly, the amount of time. It takes to get a loan done at HUD.
We can't really look at that on a quarterly basis, but we've got a fantastic team and we are seeing people start to put shovels in the ground to develop assets that will deliver in two or three years. And if you look at the numbers, Jade, as it relates to deliveries, in 2024, where you're still having a significant amount of multifamily deliveries into the high-growth markets. There is a significant step down from 5 to 600,000 units to somewhere between two and 300,000 units that are projected to deliver in '26 and '27 right now.
And so people are seeing that opportunity. And as construction costs have come down are starting to put shovels into the ground to build and deliver new product in a couple of years from now. And then as we just discussed, as it relates to our capital markets business. We've generally speaking, been somewhere around 8% to 10% of total multi-family lending volume in the country on the broader overall capital markets, number of CRE lending, we've got about a 2% market share.
So as you see the other asset classes that need capital, the ability for our debt brokerage team to place capital on office, retail, hospitality and industrial is enormous. And so there's the real opportunity for us to pick up market share in that broader capital markets business.
And then finally, if you look at investment sales, as I just said, we've never been busier as it relates to working with our clients to show them what the value of their assets are and the hope is that we're not doing that from a sort of let's just appraised with the valuation and return that number to our ship to our investors, but that the appraisals and BOVs that we're doing is getting people ready to actually transact, but it was a slow start to the year from the investment sales side across the market. But given the team that we've invested in and what I consider to be the very best multifamily investment sales platform in the country. We have a real opportunity. We continue to move up the tables there.

Jade Rahmani

Thanks for that. On the credit side still remains benign. Did have an uptick.

William Walker

What trends are you seeing maybe on a forward looking basis on the credit it seems like you're not concerned, but I would hope for a comment on Greg went through in great detail on the loans that we focus on pre-purchased as well as on a very small delinquency number relative to the size of the portfolio. Actually also underscore 92% of our Irish portfolio is fixed rate loans.
And I also pointed out that the agencies, and we have very few maturities in 2024, and that's all good from a credit standpoint. It obviously puts a lot of it puts the onus on our origination team to go outside of Walker & Dunlop's portfolio and find new loans. But investors have to remember Walker & Dunlop when I joined this firm in 2003, we had a $5 billion servicing portfolio. So the growth from $5 billion to $132 billion has been going out and essentially stealing deal flow from the competition. And as I said in my prepared remarks, over 75% of our Q2 or loan originations were new loans to Walker & Dunlop. We have a track record of doing that, and we'll continue to do that.
So we got to go out and find new loans to put into the portfolio. But we have very little refinancing risk in the portfolio today, I think the sense that rates are higher for longer, Jade and people are getting used to it, and it's going to cause some problems in some in the CLO market. I think that a lot of people have been sitting there looking at the CLO market waiting for rates to come down, that might it saved the deal. Those deals that have CLO debt on them are either hitting the wall where they're going to become a foreclosure or they're getting recapitalized.
One thing we have consistently seen in the multifamily space is that there is fresh equity capital to step in and buy assets at a discount question is how much is the seller willing to discount the property? And I think the sense that we're in a higher for longer rate environment says that people are sort of coming to grips with that, not hoping that rates are going to bail out the deal and they either have to go find new equity to come into the property or give up the property and let new ownership come in and take it over. But very, very distinct from post the GFC where you didn't have the equity capital ready to step in and play, nor in some of the debt capital today, there is a huge amount of equity capital looking to jump into the market at any kind of discount two current values.

Jade Rahmani

Thanks for taking the questions.

William Walker

Thank you.

Operator

Steven DeLaney, JMP.

Steven DeLaney

Good morning, Willy and team.
Thanks for taking the question for Willy. You commented about the GSEs and I think I don't want to misquote you, but your view that they would we've worked very hard to meet their $70 billion goal this year.

William Walker

Again, let me just jump in on that. Just let me just jump in on that. What Greg said was it is our expectation that they repeat 23 volumes in 24, which says that right now or expectations of the two of them come in somewhere in the mid 50s and not at that job $1 billion number. Why would we love for them to get to that $70 billion number, but what we're essentially saying is we're parity what they told us in Q1, which is they told us in Q1. We think 24 will be a redo of 23.
And in our last earnings call. I said I was a little bit, you know, a little bit surprised by them telling us that given the volume of refinancing out there that they could step into and yet the Fannie Mae dust conferences going on this week. I know they are very focused on trying to deploy as much capital as they can and be a very significant market participant. And so that's all encouraging words. If you look at the volume in Q1 that both we and they did, you have to sit there and say they're on track, right now to do a repeat of 23, 24. But if we see a pickup in activity in two end of Q2, Q3, Q4; they very much have the ability to get to their caps of $70 billion. But right now, we're not seeing that in the pipeline.

Steven DeLaney

Got it. And thank you very much for clarifying that. What have you found interesting expanding their basket. Do they have the administrative flexibility without having to go to Congress or anything within the FHFA and the GSEs? Do they have the internal flexibility to modify. They are LTV.s, the DSCR.s. Can they broaden the basket, if you will, to trying to put more and more money out to serve the market.

William Walker

Sure. So let me just give you a couple of examples on that. They do. The first is on that that lease up example that I gave Could they drop down the lease percentage or units occupied number to be able to step in earlier on lease up deals they can. And I've spoken directly with the regulator about that very often that opportunity that sits there. The other is that a lot of banks want to move collateral off of their balance sheet. And so Freddie has a program called the Q series, which allows them to go in securitized pools of multi-family loans that are sitting on bank balance sheets. Penny couldn't do that if they wanted to.
They are today and there's a little bit of a difference there in the sense that the K series is a it's a pool asset securitization model where the best program is a single asset. Our mortgage-backed security model. But with that said, Fannie could also mimic what Freddie is doing to trying to provide liquidity to the banking sector right now, if they want to move collateral off their balance sheet and get it securitized.
Those are two examples, but there are other areas, preferred equity, for instance, and we can put preferred equity today with ease on to Freddie Mac financings. Fannie is a little bit more challenging to put preferred equity onto them. So both agencies have the ability to be more entrepreneurial to then deploy capital that preferred equity Steve is super important. If you're if you've got a debt fund loan that was so for plus 300, it's now at 8.5%, and you can swap into a fixed rate agency execution in the high fives, low sixes, depending on where the tenure is. And but you can't do that at current leverage levels. So we sit there and look at a loan that had a debts or as is it a 90% LTV loan, we're only lending at 65% LTV with the agencies.
So how do you how do you fill that gap? You fill that gap year with common equity or preferred equity and so working with us to be able to do preferred equity and Walker & Dunlop has a fund with a very large sovereign wealth fund to put preferred equity into agency deals. That's the type of thing that will allow borrowers to work out some of the problems that exist today and get a structure that works for them in the long term.

Steven DeLaney

Can you comment on how large the fund, pref equity relationship is our private equity relationship?

William Walker

Yes, sure. We received our first our first separate account that we did with that investor was $250 million. We deployed that very quickly and we are right now refreshing that fund with that large investor file.
Okay, thanks.

Steven DeLaney

And one just more quick follow-up bridge lending. You've been involved your comments about the banks, obviously pulling back there. It's just a huge supply as we see it with the public commercial mortgage rates vintage 2021, 2022 bridge loans, nothing is getting done in three years, turned in three years. Everything's having to be extended and terms obviously are becoming more favorable to lenders.
And do you see WD. partners increasing your bridge lending to take advantage of some of those opportunities when they are properly recapitalized of whether it's with the existing ball or with the new borrower coming in.
So could we see more bridge loans directly on WD.'s balance sheet or within your joint venture that you have?

William Walker

So the joint venture that we have, as you know, Steve has not been very active and Ryan and I would tell you that that is more to do with our partner not really wanting to put more capital out right now that it is Walker & Dunlop wanting to put capital out.
As it relates to our balance sheet, I would put forth to you that Greg has been extremely good and extremely protective of the capital that we have at Walker & Dunlop to both continue to invest in bringing on production talent. And at a time when we believe that bringing on production talent is extremely important to continue to invest in the platform, investing in some of the funds that we're raising at Walker & Dunlop investment partners and then maintaining a very healthy cash position as you just said, which is over $200 million from coming out of Q2 by excuse me, coming out of Q1.
And so I would tell you that in up the balance sheet with bridge loans right now is clearly not our strategic focus. And at the same time, when we have important strategic deals to get done as either doing the bridge loan or investing in the bridge loan with a third party is an important thing for us to be able to do. It's why we have capital on our balance sheet and we have a history of doing just that. So it's strategic more than it is programmatic, if that makes sense.

Steven DeLaney

Got it. Yes (multiple speakers)--

Gregory Florkowski

And now we're not letting our CFO, Steve one thing, sorry to interrupt you, but I'll just layer on to what Willy said. So absolutely right. We're 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 that on our call last quarter it was a $150 million raise. We've said to lever that up. So we have about $0.5 billion through that fund, and that's kind of the anchor investment to trying 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 trying to meet that opportunity but as Willy said, not on our balance sheet, but certainly you're finding ways with our access to capital and deal flow to do it.

Steven DeLaney

That's helpful. Thanks, Greg. And it seems there is this opportunity you fix this huge bit of basket of broken or stress bridge loans. But probably we should think of your opportunity is 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?

William Walker

Greg, to answer that right now.

Gregory Florkowski

But I would say I think our fair characterization, but I think we there will be opportunities for us to refinance those bridge loans through the fund business. So I would think of us as a co-pay 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. So we're shoulder to shoulder with our partner for the lion's share of the capital and mind share in the risk sits with the capital partner versus us. And that's exactly why we started building WDIP., and that's how we're how we're using that opportunity and the ability to raise capital from a bunch of different investors to meet that demand that's out there, and we're actively in the process of raising it.

Steven DeLaney

That's helpful. And thank you both for your comments this morning.

Operator

Brian Violino, 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 yes, there's some of those maturities that were extensions that had been pushed in 2023, and you talked about 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 activities that something that you saw happening in the first quarter, Brian, we clearly saw it.

William Walker

And I guess when we look at the maturity schedules and we're looking at an annual maturity schedule and not necessarily February, March, June or 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 were ready to have a lower cost to capital. And let's just wait and then all of a sudden that shifted and everyone's Oh, gosh.
Okay. 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 a kind of game on as it relates to transaction activity, but let's wait for those cuts to come. And then all of 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 now being put on the market and said, let's get it moved FlexGo, I need the capital there. And so I think we're seeing a shift in the mentality and specifically to how much is extending for 10 versus I'm going to call the loan and have it come our way. I think a lot of banks that have a of a current performing commercial real estate loan that's earning them. So for plus 300, they 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 on bank real estate departments are also thinking if they were to get a payoff, they don't know they're going to get the capital back to go redeployed on new loans. So they'd like to keep their outstandings up. The issue with it is particularly in multi-family. That's expensive capital, you can get a lot cheaper capital if you were to go and refinance at the agencies or with HUD. So as a result of that, some 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.
And spreads on Agency lending are relatively tight and 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. I appreciate all the commentary on the on the credit and the loan repurchase requests from Fannie and Freddie. I guess just any sort of indications or expectations that loan repurchase requests could is the increasing from here on out or you think these are more sort of one-off issues as of right now?

William Walker

There's nothing we're seeing that the that loan for purchase requests a lot of the one thing that I want to be really clear with here on the multi-family business at Fannie and Freddie is very distinct from their single-family business. People here are loan repurchases and they get kind of picked out thinking back to 2007 when the single-family mortgage market had lots of repurchases from Fannie and Freddie. This is wholly different reserve single asset in 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 and 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 had 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 not 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, but they start to win in the market as we move through the year.

Brian Violino

Very helpful. Thank you.

Operator

(inaudible) .

Just with your commentary on the brokered volumes shifting to more non multi-family property types. Is that expected to does your pipeline suggests it will continue into 2Q? And do you think you're properly?
It's staffed to handle that mix?

William 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 low rates, the coupon rates that we are deploying that capital at in some instances, just make my eyes spend in the sense that it's a silver plus 400 dealer to get to 1011% coupon rate. The 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 commercial real estate assets at so for plus 400. They sharpen their pencils and get going very quickly. And so there is a 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 it's a great conduit to deploy capital, and we're doing just that today and outside of multifamily and outside of the GSEs.

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 are there? If you can share any color there, that would be helpful.

William Walker

That's a great question.
Greg, you have to have data on that?

Gregory Florkowski

I don't I don't have the percentages 40 there. We can definitely get that. But I'll tell you it's usually on the it's on a capital relationship perspective, not necessarily an asset class perspective. So we have subservicing relationships with life insurance companies and different sources of capital. So when we execute a deal, if they're a partner capital partner that goes office will service those office loans from Tokyo. It's more capital specific and then it is property type specific, but we can spend the time getting those numbers and gotten and the only thing.

William Walker

And the other thing on that, Derek, as you well know, those servicing fees, we love them and they are great. And we have a number of capital providers, as Greg just said, that pay us subservicing fees, but in comparison to in taking risk on a Fannie Mae loan or capitalizing a 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 four basis 0.6 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 boat business versus our agency and high blended.

Got ahead. Are helpful color. Thanks for answering my questions.

Operator

This does conclude the questions-and-answer portion of today's call. I would like to turn the call back over to Willy Walker for any closing remarks.

William Walker

Thanks for joining us today and appreciate the time and focus on Walker & Dunlop. And I'll reiterate my thanks to the W&D team for all their hard work, and I hope everyone has a great day.

Operator

It does conclude today's conference call. Thank you for your participation. You may now disconnect.