Despite the drop in transaction volume, the company remains confident in its five-year business plan
Walker & Dunlop, a commercial real estate financing company, has unveiled its financial results for the fourth quarter of 2022, showing a decrease in annual revenues and transaction volume.
The company generated a net income of $41.5 million, a 48% drop from the same period in 2021. The adjusted EBITDA was $92.6 million, down 16% year over year. Despite the challenging macroeconomic environment, the company’s board of directors authorized a 5% increase in quarterly dividend to $0.63 per share, marking the fifth consecutive year of dividend increase.
Walker & Dunlop CEO Willy Walker commented that the second half of 2022 was extremely challenging due to macroeconomic headwinds and capital market disruptions caused by aggressive Federal Reserve market intervention. However, the company’s recurring revenue streams from servicing and asset management, access to counter-cyclical capital from Fannie Mae and Freddie Mac, and market positioning as a trusted advisor to clients allowed it to deliver better financial results than the dramatic drop-off in deal volume.
“Yet Walker & Dunlop’s recurring revenue streams from servicing and asset management, access to counter-cyclical capital from Fannie Mae and Freddie Mac, and market positioning as a trusted advisor to our clients allowed us to deliver financial results significantly better than the dramatic drop-off in deal volume,” Walker said in a statement.
The decrease in debt financing volume was due to inflationary impacts on building products and a dramatically increasing interest-rate environment during the quarter. The firm also cited the shifting credit market outlook as the reason for the decrease in principal lending and investing volume, which led to its continued conservative approach to bridge lending during the quarter.
The challenging macroeconomic conditions decreased liquidity supplied to the commercial real estate sector, resulting in a decline of 66% and 64% in brokered debt and property sales volume, respectively. Despite these challenges, Walker said the firm remains focused on its five-year business plan, the Drive to ‘25, and is confident that it will achieve the ambitious goals of $2 billion in revenue and $13 of diluted earnings per share in 2025 due to increased demand for its services coming out of the Federal Reserve’s tightening cycle.
“Our business model is unique in generating both transaction volume growth along with recurring revenues from servicing and asset management fees,” he said. “And our focus on the multifamily industry, from a transaction and credit exposure standpoint, has been unique and wildly valuable. Our team, brand and technology are positioned to deliver great growth over the coming years.”
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