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Walker & Dunlop(NYSE: WD)
Q1 2024 Earnings Call
May 02, 2024, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
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 Simms. Please go ahead.
Unknown speaker
Thank you, Ruth. 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. These slides serve as a reference point for some of what Willy and Greg will touch on during the call.
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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. 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.
Willy Walker -- Chairman and Chief Executive Officer
Thank you, Jenna, and good morning, everyone. As we outlined in our February earnings call, the strong January jobs report pushed back expectations for a March rate cut 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. Yet within this context, the W&D team closed $6.4 billion of total transaction volume, down only 5% from Q1 of last year.
Given slightly lower volumes and no one-time 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 right revenues and expenses, was $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 atypically, 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 are on non-multifamily assets, and the start to the year by our debt brokerage team using non-agency capital is encouraging.
And as you can see on Slide 7, the Mortgage Bankers Association estimates that $929 billion of commercial real estate mortgages will churn in 2024. Of that rather large volume, only 28%, or $257 billion are multifamily loans, and only 3%, or $28 billion are Fannie, Freddie, and HUD loans. In a normalized market, half the market would be multifamily loans and half that volume would be with the GSEs and HUD. This lack of multifamily and agency maturities is good from a maturity risk standpoint, but will require our team to search outside the W&D portfolio for financing opportunities, something our team has done consistently as W&D has climbed the league tables and built a $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 or are they going to allow borrowers to extend? If banks call loans, there will be over $400 billion of maturities that need to be refinanced off bank balance sheets in 2024. If banks simply extend loans because they are performing and the bank is making SOFR 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 fund 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 DUS and Optigo partners. For example, a multifamily construction loan on a new asset in Austin, Texas, might be priced at SOFR plus 300 with a 3-1-1 structure, three-year loan with two one-year extension options.
If the asset is still leasing up and doesn't have 90% occupancy, it can't qualify for a GSE loan. But if Fannie and Freddie modified their occupancy requirements for assets owned by established developers with impeccable track records, they could 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, and also derisk the bank's balance sheet. We continue to invest in technology and are seeing promising signs of growth in small-balance lending and appraisals.
Our multifamily appraisal business apprise grew Q1 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 with 23% fewer people. Our small balance lending business has maintained market share with Fannie and Freddie and grew Q1 revenues 17% year over year, with the opportunity to grow dramatically as banks continue to pull back from originating new, small balance, multifamily loans. Our servicing and asset management business contributed meaningfully to the strength in adjusted EBITDA, thanks to dramatically lower runoff in 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 2,000 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 Alliant 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 119 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 remains 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 add UPB 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?
Greg Florkowski -- Executive Vice President, Chief Financial Officer
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, a $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 non-cash MSR revenues from GSE lending.
Despite the GSE's slow start, there are deals in capital available which drove our broker debt volumes up 40% compared to the same quarter last year. The decrease in non-cash 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, or SAM, continues to perform well, generating stable cash revenues from our growing servicing portfolio and assets under management. SAM 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 fees 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 were 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 in April, 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 Freddie. 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 total $46 million, and in March, we entered into an indemnification agreement that shifts the risk of loss from Freddie 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 customer is working on a plan to sell a portfolio of assets that includes our asset, and we are not expecting to incur a loss on that loan. The 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 either agency. 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 is 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 have 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 collaterals 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 ended Q1 with $217 million of cash on the balance sheet after paying bonuses, earnout 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 16, 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 though 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 adapting to "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.
Importantly, our pipeline of closed and signed deal flow for the second quarter is already 35% above the level closed 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 a 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 guide 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.
Willy Walker -- Chairman and Chief Executive Officer
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. If 2023 was a wait-and-see year, 2024 may end up being the year when the clock ran out on refinancings, capital deployment, and waiting for rate cuts that 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. Our current pipeline of signed applications and rate-locked GSE loans for Q2 is already larger than what we rate-locked 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 opinion of value or BOVs 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 BOVs being requested hopefully translates into a more fluid acquisitions market as would-be sellers accept current market conditions and begin transacting. Blackstone's announcement to acquire AIR Communities for $10 billion felt like the beginning of a new cycle, yet the subsequent surge in interest rates over the past three weeks seems to have tempered the market's excitement.
The Blackstone's acquisition is reflective of three current market dynamics. First, there's a ton of equity capital that has been on the sidelines for almost two years and needs to be deployed.Second, that while nobody knows exactly where the bottom of this cycle is, we are close to the bottom or beginning to recover. And third, "I'm waiting for rate cuts" 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 requests in March of the past 23 months and was able to meet all redemption requests for the second consecutive month.
As the largest non-traded REIT pivots from net seller to net buyer, it will spur transactions that have been absent from the market for the past several quarters. At the beginning of the year, we structured our senior management team, promoting Kris Mikkelsen and Don King 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 our small company touch and feel, combined with our large company capabilities, is winning.
W&D sits in a unique position in the market, where 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 W&D'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.
Questions & Answers:
Operator
Thank you. [Operator instructions] We'll go first to Jade Rahmani with KBW.
Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst
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, a creator of credit products, interest-earning assets, could potentially increase its market share in the business. Where do you see the biggest opportunities for that?
Willy Walker -- Chairman and Chief Executive Officer
Good morning, Jade, and thanks for joining us. The first thing is, obviously, to maintain our leadership position 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, pipeline looks good for Q2 and we're seeing them step into the market more. HUD had a slow start to the year and HUD's one of those businesses that, quite honestly, the amount of time it takes to get a loan done at HUD, you 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. 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's a significant step-down from 500,000 to 600,000 units to somewhere between 200,000 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 multifamily lending volume in the country.
On the broader, overall, capital markets number all 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.
The hope is that we're not doing that from a sort of let's just appraise what the value is and return that number 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 to continue to move up in the lead tables there.
Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst
Thanks for that. On the credit side, still remains benign. Did have an uptick. What trends are you seeing, maybe on a forward-looking basis on the credit? Seems like you're not concerned, but would hope for a comment on that.
Willy Walker -- Chairman and Chief Executive Officer
Greg went through in great detail the loans that we both repurchased, as well as a very small delinquency number relative to the size of the portfolio. As he also underscored, 92% of our at-risk portfolio is fixed-rate loans. And I also pointed out that the agencies and we have very few maturities in 2024. 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 Q1 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 they sense that rates are higher for longer, Jade, people are getting used to it. It's going to cause some problems 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 save 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. The 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. The 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, very distinct from post-GFC, where you didn't have the equity capital ready to step in and play, nor in some instances, the debt capital. Today, there is a huge amount of equity capital looking to jump into the market at any kind of discount to current values.
Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst
Thanks for taking the questions.
Willy Walker -- Chairman and Chief Executive Officer
Thank you.
Operator
We'll go next to Steve DeLaney with Citizens JMP.
Steve DeLaney -- JMP Securities -- Analyst
Good morning, Willy and team. Thanks for taking the question. Willy, you commented about the GSEs, and I think I don't want to misquote you, but your view that they would work very hard to try to meet their $70 billion goal this year.
Willy Walker -- Chairman and Chief Executive Officer
Hi, Steve. 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 our expectations is the two of them come in somewhere in the mid-50s and not at that $70 billion number. Boy, would we love for them to get to that $70 billion number? But what we're essentially saying is we're parroting 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 surprised by them telling us that given the volume of refinancing out there that they could step into. The Fannie Mae DUS conference is 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 in '24. But if we see a pickup in activity into 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.
Steve DeLaney -- JMP Securities -- Analyst
Got it. Thank you very much for clarifying that.
Willy Walker -- Chairman and Chief Executive Officer
Yeah.
Steve DeLaney -- JMP Securities -- Analyst
What I found interesting is expanding their basket. Do they have the administrative flexibility without having to go to Congress or anything, within the FHFA and the GSE, do they have the internal flexibility to modify their LTVs, the DSCRs? Can they broaden the basket, if you will, to try to put more money out to serve the market?
Willy Walker -- Chairman and Chief Executive Officer
Sure. So, let me just give you a couple of quick examples on that. They do. The first is, on 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 -- that opportunity that sits there. The other is that a lot of banks want to move collateral off of their balance sheets. And so, Freddie has a program called the Q Series, which allows them to go and securitize tools of multifamily loans that are sitting on bank balance sheets.
Fannie could do that if they wanted to. They aren't today. And there's a little bit of a difference there in the sense that the K Series is a -- it's a pooled asset securitization model, whereas the DUS program is a single asset mortgage-backed security model. But with that said, Fannie could also mimic what Freddie is doing to try and provide liquidity to the banking sector right now if they want to move collateral off their balance sheets and get it securitized.
Those are two examples. But there are other areas. Preferred equity, for instance, we can put preferred equity today with ease onto Freddie Mac financings. Fannie's 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've got a debt fund loan that was SOFR plus 300, it's now at 8.5%. You can swap into a fixed rate agency execution in the high 5s, low 6s, depending on where the 10-year is.
But you can't do that at current leverage levels. So, we sit there and look at a loan that had a debt service -- is it a 90% LTV loan? We're only lending at 65% LTV with the agencies. So how do you fill that gap? You fill that gap either with common equity or with 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.
Steve DeLaney -- JMP Securities -- Analyst
Can you comment on how large the fund -- the pref equity relationship is?
Willy Walker -- Chairman and Chief Executive Officer
Our pref equity relationship?
Steve DeLaney -- JMP Securities -- Analyst
Yeah.
Willy Walker -- Chairman and Chief Executive Officer
Sure. 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.
Steve DeLaney -- JMP Securities -- Analyst
OK. Thanks. Just one quick follow-up. Bridge lending.
You've been involved. Your comments about the banks obviously pulling back there. There's just a huge supply. We see it with the public commercial mortgage REITs.
Vantage 2021, 2022 bridge loans. Nothing's getting done and turned in three years. Everything is having to be extended. Terms, obviously, are becoming more favorable to lenders.
Do you see WD increasing your bridge lending to take advantage of some of those opportunities when they're properly recapitalized, whether it's with the existing borrower or with a new borrower coming in? So, could we see more bridge loan directly on WD's balance sheet or within your joint venture that you have?
Willy Walker -- Chairman and Chief Executive Officer
So, the joint venture that we have, as you know, Steve, has not been very active. And I would tell you that that is more to do with our partner not really wanting to put more capital out right now than 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 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 he just said, which is over $200 million coming out of Q2 -- excuse me, coming out of Q1. And so, I would tell you that loading 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, us 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.
Steve DeLaney -- JMP Securities -- Analyst
Got it. Yes.
Greg Florkowski -- Executive Vice President, Chief Financial Officer
And I'll-Steve, one thing, sorry to interrupt you, but I'll just layer on to what Willy said. So, absolutely right. Trying not to use the balance sheet to execute that strategy. But our Walker & Dunlop Investment Partners did close a round of funding with a large insurance company in the fourth quarter of last year, we mentioned it on our call last quarter.
It was $150 million raise. We've since levered that up. So, we have about $0.5 billion through that fund and that's kind of the anchor investment to try to raise a larger fund. So, we're very much in the process of trying to pull the capital together and pool different capital sources to try to meet that opportunity.
But as Willy said, not on our balance sheet, but certainly finding ways with our access to capital and deal flow to do it.
Steve DeLaney -- JMP Securities -- Analyst
Sure. That's helpful. Thanks, Greg. And it seems that there is this opportunity to fix this huge basket of broken or stressed bridge loans.
But probably we should think of your opportunity as one that is more advisory and bringing in supplemental capital to fix a broken loan rather than just replacing the bridge loan kind of de facto. Is that the right way to think about it?
Willy Walker -- Chairman and Chief Executive Officer
Greg, you want to take that? I think that's fair, Steve.
Greg Florkowski -- Executive Vice President, Chief Financial Officer
Yes, fair characterization, but I think there will be opportunities for us to refinance those bridge loans through the fund business. So, I would think of us as a solutions provider, and it just won't be on our balance sheet where we have -- we're underwriting the loans and we have a co-investment in that fund that we're shoulder to shoulder with our partner. But the lion's share of the capital and lion's share of the risk sits with the capital partner versus us and that's exactly why we started building WDIP and that's how we're using that opportunity and the ability to raise capital from a bunch of different investors to meet that demand. It's out there and we're actively in the process of raising it.
Steve DeLaney -- JMP Securities -- Analyst
That's helpful. And thank you both for your comments this morning.
Willy Walker -- Chairman and Chief Executive Officer
Thanks, Steve.
Operator
We'll go next Brian Violino with Wedbush Securities.
Brian Violino -- Wedbush Securities -- Analyst
Great. Good morning. Thanks for taking my questions. There's been a lot of talk about CRE maturities increasing this year and that there's some of those maturities that were extensions that had been pushed from 2023.
And you talked about it a bit earlier in the call, but just given where rates have gone, are you anticipating that the 2024 maturity wall could be pushed out further and have a negative impact on transaction volumes from extension activity? Is that something that you saw happening in the first quarter?
Willy Walker -- Chairman and Chief Executive Officer
Brian, we clearly saw it in -- I guess, when we look at the maturity schedules, we're looking at an annual maturity schedule and not necessarily February, March, July, what have you. But we clearly saw a lot of sort of extensions in Q1. And I would also say to you that, I mean, Q1 was a -- the psychology of the market was coming into rate cuts in March, we're ready to have lower cost of capital, and let's just wait. And then all of a sudden it shifted and everyone said, oh, gosh, OK, well, I was planning on waiting, and now I'm not sure that I can wait.
And I think that what we're seeing in the market right now, clearly from our pipeline, is that people are saying, OK, this is the reality, this is the rate environment we are going to have to transact in on a refinancing, on a sale, on a purchase. Let's adjust our numbers and let's see if we can get to work. And so, I do believe that the Q1 was this sort of -- it was the transitional quarter. It was coming out of '23 saying rates are going down and '24 is going to be kind of game on as it relates to transaction activity, but let's wait for those cuts to come.
And then all of a sudden, Q1 changed the narrative. And so, what we're very clearly seeing is someone who might have pulled a property in Q4 because they thought they were selling it at too low a price because rates were going to drop and therefore cap rates were also likely to drop, a lot of those properties are now being put on the market and said, let's get it moved, let's go. I need the capital there. And so, I think we're seeing a shift in the mentality and specifically to how much is extend and pretend versus I'm going to call the loan and have it come our way.
I think a lot of banks that have a current performing commercial real estate loan that's earning them SOFR plus 300, they'd like to keep that on their books. They like that. There's no reason for them to have that payoff. And I would also say to you, a number of people in bank real estate departments are also thinking, if they were to get a payoff, they don't know if they're going to get the capital back to go redeploy it on a new loan.
So, they'd like to keep their outstandings up. The issue with it is, particularly in multifamily, is that that's expensive capital. You can get a lot cheaper capital if you were to go and refinance with the agencies or with HUD. So, as a result of that, people -- the borrowers are saying, I'd like to see if I can move it out of that into something else.
If you're in office, retail, hospitality, that may be the best you're going to get. But the CMBS market is surprisingly strong right now. Spreads on agency lending are relatively tight from a historic standpoint. And so, there is alternative capital out there for people to look.
And the real question is, is the bank extending the best alternative, or is there other capital that will come in at a cheaper cost to them? And quite honestly, that's our team's job every day to meet with our clients and show them what alternative capital can provide rather than extending with the banks.
Brian Violino -- Wedbush Securities -- Analyst
Great. Thank you. And one more question. Appreciate all the commentary on the credit and the loan repurchase request from Fannie and Freddie.
I guess just any sort of indications or expectations that loan repurchase requests could be increasing from here on out, or you think these are more sort of one-off issues as of right now?
Willy Walker -- Chairman and Chief Executive Officer
There's nothing we're seeing that loan purchase requests -- a lot of -- the one thing that I want to be really clear with here, the multifamily business at Fannie and Freddie is very distinct from their single-family business. People hear of loan repurchases and they get kind of freaked out, thinking back to 2007, when the single-family mortgage market had lots of repurchases from Fannie and Freddie. This is wholly different. These are single-asset, very specific situations.
And as Greg, I think, underscored, we have bent over backwards to be a very cooperative partner with Fannie and Freddie on the three buybacks that we have done. We have gone well beyond what our responsibility is on two of those loans to partner and not be contentious in saying, that's not our responsibility, that's your responsibility. And as a result of that, I'm very hopeful that that then engenders a bigger, tighter, broader partnership going forward after having stepped in on those loans. And, fortunately, we have the financial wherewithal to do just that and to work them out.
But we did that to be a great partner. And so, I don't see anything right now. As Greg said very clearly, we have no other loans in our portfolio that would lead us to believe there are any other repurchases coming up. And as I said, I believe that as Fannie and Freddie get to their affordable housing goals and realize that the credit in their portfolios is very strong, that they start to lean into the market as we move through the year.
Brian Violino -- Wedbush Securities -- Analyst
Got it. Very helpful. Thank you.
Willy Walker -- Chairman and Chief Executive Officer
Thank you, Brian.
Operator
We'll go next to Derek Sommers with Jefferies.
Derek Sommers -- Jefferies -- Analyst
Hi. Good morning, everyone. Just with your commentary on the brokered volumes shifting to more non-multifamily property types, is that expected to -- does your pipeline suggest that it'll continue into 2Q and do you think you're properly staffed to handle that mix?
Willy Walker -- Chairman and Chief Executive Officer
Good question. Very much the pipeline shows that there is continued growth in that line of business. And I would tell you, Derek, that the rates -- the coupon rates that we are deploying that capital at, in some instances, just make my eyes spin, in the sense that it's a SOFR plus 400 deal, it's a 10%, 11% coupon rate. There is a lot of debt -- there's a lot of equity capital out there.
There's also a lot of debt capital out there. I don't need to tell you that every major private equity firm has a big debt fund and they're all looking for opportunistic lending. And when you come to them with an opportunity to lend on a commercial real estate asset at SOFR plus 400, they sharpen their pencils and get going very quickly. And so, there's a huge amount of debt capital out there.
And one of the great things that W&D has is, we've got the client relationships to be the conduit for that capital to be deployed. And then we also have Walker & Dunlop Investment Partners where, as Greg mentioned a moment ago, we've got a Guardian Fund, we've got a PAC Life Fund. We've got a number of relationships with large capital sources to deploy both equity capital as well as debt capital directly into our deal flow. So, our distribution network is, A, very valuable, but B, it's a great conduit to deploy capital.
And we're doing just that today outside of multifamily and outside of the GSEs.
Derek Sommers -- Jefferies -- Analyst
Got it. Thank you. And then just on the dynamics of -- what portion of that brokered volume is flowing through to your servicing portfolio? Is that only the multifamily assets, or if you could share any color there, that would be helpful.
Willy Walker -- Chairman and Chief Executive Officer
That's a great question. Greg, do you have data on that?
Greg Florkowski -- Executive Vice President, Chief Financial Officer
I don't have the percentages for you, Derek. We can definitely get that. But I'll tell you, it's usually on a capital relationship perspective, not necessarily an asset class perspective. So, we have sub-servicing relationships with life insurance companies and different sources of capital.
So, when we execute a deal, if they're a partner or a capital partner that does office, we'll service those office loans. So, it's more capital-specific than it is property-type-specific. But we can spend a little bit time and get you those numbers.
Derek Sommers -- Jefferies -- Analyst
Got it.
Willy Walker -- Chairman and Chief Executive Officer
And the only thing, Derek, as you well know, those servicing fees, we love them and they're great. And we have a number of capital providers, as Greg just said, that pay us sub-servicing fees. But in comparison to taking risk on a Fannie Mae loan where we're capitalizing the mortgage servicing right over the life of a loan that is prepayment protected, we do not capitalize these servicing rights.So we do not look out and say, we expect that loan to be on for 10 years and we're going to back into a number. We just take that as revenue.
So, it'll be a four-basis-point, six-basis-point servicing fee and we just take it in as revenue as the loan sits on our books, we don't capitalize it. So, that's just an important thing to keep in mind as it relates to the capital market side of the business versus our agency and hard lending.
Derek Sommers -- Jefferies -- Analyst
Got it. Yes, that's helpful color. Thank you for answering my questions.
Operator
This does conclude the question-and-answer portion of today's call. I would like to turn the call back over to Willy Walker for any closing remarks.
Willy Walker -- Chairman and Chief Executive Officer
Thanks, everyone, for joining us today. Appreciate the time and focus on Walker & Dunlop. And I reiterate my thanks to the W&D team for all their hard work and I hope everyone has a great day.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Unknown speaker
Willy Walker -- Chairman and Chief Executive Officer
Greg Florkowski -- Executive Vice President, Chief Financial Officer
Jade Rahmani -- Keefe, Bruyette and Woods -- Analyst
Steve DeLaney -- JMP Securities -- Analyst
Brian Violino -- Wedbush Securities -- Analyst
Derek Sommers -- Jefferies -- Analyst
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