Walker & Dunlop buys iCap in plan to increase its volume by 33%

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Walker & Dunlop acquired commercial mortgage banker iCap Realty Advisors as part of its strategic plan to increase its annual originations by at least one-third in the next two years.

Terms of the deal were not disclosed.

Atlanta-based iCap originates between $700 million and $1 billion annually of brokered volume. Its origination team and support staff, including managing directors Alfie Means and David Collie, joined Walker & Dunlop's capital markets group.

It also services $2 billion of loans made by life insurance companies.

"With the goal to grow our annual loan originations to $30 billion to $35 billion by the end of 2020, we have been very focused on expanding our capital markets presence into major markets where we are underrepresented, such as Atlanta," Walker & Dunlop Chairman and CEO Willy Walker said in a press release. "As one of the largest mortgage banking firms in Georgia, iCap will immediately benefit Walker & Dunlop through its deep client relationships and strong deal flow."

Commercial mortgage debt outstanding grew faster in the first six months of this year than any similar period except 2007, the Mortgage Bankers Association reported.

Separately, Walker & Dunlop reported third-quarter net earnings of $37.7 million, up 10% from the $34.4 million earned one year prior.

The period was "the third strongest transaction volume in our history and another quarter of continued execution of our strategic growth initiatives," Walker said in a press release. "Our servicing portfolio continues to grow, crossing $80 billion in the third quarter and driving dramatic growth in servicing fees and escrow earnings, which increased a combined 24% from the third quarter of 2017."

Total revenue was $184.7 million, up 3% from 2017's third quarter.

Walker & Dunlop originated $6.8 billion during the quarter, down 11% from $7.6 billion one year prior. The drop can be attributed to a $1.8 billion reduction in Freddie Mac multifamily volume to $2.3 billion. In the third quarter of 2017, Walker & Dunlop had a $1.9 billion transaction with Freddie Mac; it didn't have any large transactions this quarter.

There was also a $66.3 million reduction in Ginnie Mae volume to $197.4 million. Fannie Mae volume increased by 22% to $1.7 billion, brokered loan volume for life insurers, commercial mortgage-backed securities, banks and other investors increased 30% to $2.4 billion and interim loan financing increased 604% to $185.8 million.

Including investment sales activity, the company had $7.7 billion in total transaction volume for the quarter.

Walker & Dunlop originated $17 billion in the first nine months of the year, down from $18 billion for the same period in 2017.

Its servicing portfolio totaled $80.6 billion on Sept. 30, 2018, compared with $70.1 billion one year prior.

Walker & Dunlop's long-term objective is to generate $1 billion in annual revenue by the end of 2020.

"To achieve that goal, we need to take debt financing volume from $25 billion in 2017 to $30 billion to $35 billion in 2020, investment sales volume from $3 billion in 2017 to $8 billion to $10 billion in 2020, our servicing portfolio from $70 billion in 2017 to over $100 billion in 2020, and assets under management from under $500 million in 2017 to $8 billion to $10 billion in 2020," Walker said.

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