William M. Walker, Chairman & CEO
Walker & Dunlop’s financial results and strategic accomplishments in 2018 reflect strong progress towards achieving Vision 2020 as we drive towards our ultimate mission of being the premier commercial real estate finance company in the United States.

DEAR FELLOW SHAREHOLDERS

2018 was a year of strong financial results and continued progress towards our mission to become the premier commercial real estate finance company in the United States. Since we established this goal in 2010, we have grown total revenues at a compound annual rate of 25% and diluted earnings per share at a compound annual rate of 32% and delivered total shareholder return of 341% 1. We have achieved this strong growth by establishing and executing upon ambitious financial, operational, and strategic objectives year after year. And yet, we are still a relatively small firm, which provides us with significant growth opportunities in our existing core businesses over the coming years. Our relatively small size has also allowed us to maintain the touch and feel of a small family business while providing our customers with the capabilities of a large financial services firm. That personalized service, in an industry where we go head-to-head with companies like Wells Fargo and CBRE, is a significant competitive advantage. It is thanks to the over 700 W&D employees across the country, who provide our clients with exceptional service and execution every day, that we can continue winning and growing.

Vision 2020 is the five-year growth plan we established in 2016 to broaden our service offerings to make us increasingly relevant to our customers while driving strong financial performance. The first component of Vision 2020 is to expand our core commercial real estate lending to $30 to $35 billion of annual loan originations. We originated $25 billion of loans in 2018 and will continue to recruit bankers and brokers to Walker & Dunlop to expand our geographic footprint and client base. The second component of Vision 2020 is to broker $8 to $10 billion in annual multifamily property sales. In 2018, we brokered the sale of almost $3 billion worth of multifamily properties, and in many instances, also financed the acquisition for the buyer. Property brokerage is wildly strategic and important for Walker & Dunlop’s continued growth, as it allows us to interact with our clients when they are making tactical decisions around buying and selling assets, which then provides us with insight and opportunities to help them finance their investments. We made key hires in this business in 2018 and see wonderful growth opportunities ahead. The third component of Vision 2020 is to build an $8 to $10 billion asset management platform that will manage private capital that can be deployed across the country to meet our customers’ financing needs. We acquired JCR Capital, a registered investment adviser, in 2018 and finished the year with $1.4 billion of regulatory and additional assets under management. As we scale JCR, we will raise third-party capital with distinct return parameters, including first trust debt, JV equity, preferred equity, and mezzanine debt. Raising and controlling this capital will make us more a more strategic partner to our customers while making W&D more profitable. The final component of Vision 2020 is to grow our loan servicing portfolio to over $100 billion. W&D ended 2018 as the 7th largest commercial real estate loan servicer in the United States 2 with an $86 billion portfolio. If we continue growing our core loan origination business, we will surpass $100 billion by the end of 2020 and reap the tremendous rewards of consistent, largely prepayment protected servicing fees that the portfolio will generate over the coming years. Achieving Vision 2020 will make us more relevant to our clients and more diverse in our service offerings and will result in over $1 billion in annual revenues.

To achieve Vision 2020, we must focus on “Three Cs” Customers, Capital, and Culture. Our Customers are at the core of everything we do at Walker & Dunlop, and our goal of becoming a more significant partner to our customers has been the driving force behind all of our growth. What we provide, money, is the purest commodity on earth, and the only things that differentiate our money from that of our competitors are the people of Walker & Dunlop and the service we provide. The personalized service that Walker & Dunlop’s clients have come to expect is reflected in our Net Promoter Score (NPS), a standardized customer satisfaction metric that many companies use to gauge overall customer experience and brand loyalty. The NPS ranges from -100 to 100 and measures the willingness of customers to recommend a company to others. We began tracking our NPS a year and a half ago and currently have a score of 923, putting us at the very top-end of not just other financial services firms, but of companies around the globe.

From a Capital standpoint, our exceptional financial performance has placed us in an advantageous position. After generating $220 million in adjusted EBITDA 4 in 2018 and refinancing our corporate debt, we have a strong balance sheet with a core operating business generating significant amounts of cash. We plan to co-invest in new capital strategies developed by JCR and to continue differentiating our service offerings by using our corporate cash for strategic short-term lending opportunities. We remain focused on recruiting talented bankers and brokers to our platform and acquiring firms that will both complement our existing expertise and broaden our footprint across the country. We expect these investments to drive strong financial performance as they bring us closer to achieving the components of Vision 2020. While we continue to prioritize putting our capital towards our strategic growth objectives, the strong cash flow of our business allows us to return a portion of our capital to shareholders in the form of dividends and share repurchases. After initiating a dividend in the first quarter of 2018, in February 2019 we increased our quarterly dividend by 20% to $0.30 per share and authorized a $50 million share repurchase plan over the next 12 months. We are confident about our ability to continue growing the dividend over time while retaining sufficient capital to fuel long-term growth.

The consistent execution and strong financial performance we have delivered is due to the exceptional Culture we have at Walker & Dunlop. Investors often ask me to define our culture and what it is that makes our company so special. Responses to that question gathered through a third-party survey of clients, partners, and employees coalesced around a tenacious commitment to the very best solution for our customers; a collaborative and team-oriented approach to work; an insightful and knowledgeable group of bankers and brokers, and above all, a deep caring for our clients and for one another.

This sense of caring also extends to the communities in which we work and live. Within our workplace, we are committed to creating a safe and inclusive community that gives our employees the tools and resources they need to be successful, both professionally and personally. We are working to broaden the range of backgrounds, perspectives, and ideas that comprise Walker & Dunlop, which study after study has shown makes businesses more successful. Outside of our workplace, giving back to our communities is engrained in the culture of Walker & Dunlop. We have aligned our corporate philanthropy efforts with our passion for housing by partnering with organizations that work towards ending homelessness in the United States, and we support and celebrate our employees in their personal philanthropic endeavors. Finally, we are focused on reducing our environmental impact as a company. To that end, we evaluated our carbon footprint in 2017 and became carbon neutral through the purchase of carbon offsets. We are in the process of doing the same for 2018 and are committed to remaining carbon neutral every year going forward. By responsibly managing our operations to minimize our environmental impact and empowering our employees to do the same, we are also aiming to reduce per-employee carbon emissions each year.

Walker & Dunlop’s financial results and strategic accomplishments in 2018 reflect strong progress towards achieving Vision 2020 as we drive towards our ultimate mission of being the premier commercial real estate finance company in the United States. I would like to congratulate the entire team at Walker & Dunlop on a successful 2018 and thank our shareholders for your continued trust in our company and vision.


William M. Walker,
Chairman & CEO