Walker & Dunlop has big growth plans
Now let's look at the reasons behind this shopping spree, and the TapCap acquisition in particular.
Back in 2015, Walker & Dunlop set some ambitious growth targets it aimed to achieve by the end of 2020. And despite the disruption caused by the COVID-19 pandemic, the company had little difficulty achieving most of them.
However, Walker & Dunlop isn't finished just yet. Along with its latest annual report, Walker & Dunlop revealed its "Drive to '25'" five-year goals, and to call them ambitious would be a major understatement. Here's a rundown of the key targets Walker & Dunlop hopes to achieve by then:
- Total revenue of $1.7 billion to $2 billion. At the midpoint, this would be 68% growth over 2020 levels.
- Earnings of $13.00 to $15.00 per share. (82% growth at the midpoint)
- Over $60 billion in financing volume. ($35 billion in 2020)
- A $160 billion servicing portfolio. ($107.2 billion in 2020)
- $25 billion in property sales volume. ($6.1 billion in 2020)
- Establish real estate investment banking capabilities.
Here's the point: If Walker & Dunlop can achieve these targets, it would be on its way to being the leading commercial real estate financial firm (and would likely deliver strong stock performance for its investors in the process). And the company sees technology as a key pathway to success.
TapCap could be an especially big driver of small loan growth. Of the $60 billion in loan origination volume Walker & Dunlop hopes to do in 2025, it specifically wants $5 billion to come from small loan originations. According to Alison Williams, Walker & Dunlop's small balance lending chief production officer, "Penetrating the small balance lending market requires cutting-edge technology to reduce costs while providing an exceptional customer experience." And TapCap could be a big piece of the technological puzzle to get it there.
As Walker & Dunlop's recent investor presentation put it, "People, brand, and technology are at the core of our platform growth." So, while it might seem odd for a commercial real estate finance company to acquire tech start-ups, this could certainly give Walker & Dunlop an edge when it comes to growing the business.