Commercial mortgage lender Walker & Dunlop is shelling out $220 million to acquire rival outfit CWCapital LLC in a deal that would make the Bethesda company the eighth largest commercial real estate lender in the country.
The acquisition gives Walker & Dunlop a combined total $7.7 billion worth of commercial real estate loan originations, and an aggregate servicing portfolio in excess of $33.7 billion based on first quarter figures.
“This is a transformative deal,” said Walker & Dunlop chief executive Willy Walker on an analyst call discussing the deal. “The financial scale created by this transaction will be helpful in raising proprietary capital for our lending operations.”
Walker & Dunlop has agreed to pay CW Financial Services $80 million in cash and approximately $140 million in stock for its Needham, Mass.-based subsidiary. The deal would make CW Financial, an affiliate of Fortress Investment Group, Walker & Dunlop’s largest shareholder.
The transaction, subject to regulatory approval, is slated to close within 90 to 120 days.
“We will be able to leverage our existing platform and infrastructure to gain economies of scale,” Walker said.
Both mortgage lenders are known for financing health care and multifamily real estate deals, and are among the top 10 loan originators for Fannie Mae and Freddie Mac. Mortgage Bankers Association often places the pair within the top rungs on its annual rankings.
Privately held CWCapital, founded in 1972, has serviced $16.8 billion in commercial mortgages and closed more than $20 billion in commercial real estate deals since 1994. It has some 180 employees in 17 offices across the country.
Once the acquisition is completed, CWCapital chief executive Michael Berman will take a senior leadership role at Walker & Dunlop. The Bethesda firm anticipates there will be some staff reduction and consolidation. There is not a lot of geographic or client overlap between the two companies, though they are active in many of the same markets.
The CWCapital deal marks the second major acquisition for Walker & Dunlop in recent years. Back in 2009, the company picked up commercial lender Column Guaranteed, a subsidiary of Credit Suisse Group, for greater reach in the multifamily market.
Walker & Dunlop, founded in 1937, aggressively grown its lending operations since its 2010 debut on the public markets. The offering raised $100 million for the 73-year-old, family-run company, positioning Walker & Dunlop for deals such as CWCapital.
In the most recent quarter, Walker & Dunlop recorded $674.5 million in originations, up 33 percent from a year earlier. Revenue at the firm grew 19 percent to $34.4 million.